Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

MILFORD HAVEN CONSERVANCY BILL (By Order)

Order for Third Reading read.

To be read the Third time upon Tuesday 3 May.

SHREWSBURY AND ATCHAM BOROUGH COUNCIL BILL [Lords] (By Order)

TEES AND HARTLEPOOL PORT AUTHORITY BILL (By Order)

GREATER LONDON COUNCIL (MONEY) BILL (By Order)

Orders for Second Reading read.

To be read a Second time upon Thursday 5 May.

LLOYDS BOWMAKER BILL [Lords] (By Order)

Order for Second Reading read.

To be read a Second time upon Tuesday 3 May.

Oral Answers to Questions — NATIONAL FINANCE

Profit Sharing and Share Ownership Schemes

Mr. Kenneth Carlisle: asked the Chancellor of the Exchequer how many profit-sharing and share ownership schemes have been set up by businesses since the introduction of the provisions of the Finance Act 1980.

The Financial Secretary to the Treasury (Mr. Nicholas Ridley): I should like to apologise on behalf of my right hon. and learned Friend the Chancellor of the Exchequer for his absence today. He is in Washington attending the development committee of the World Bank.
At the end of last month, the number of employee share schemes approved by the Inland Revenue since April 1980 was 442. This total is made up of 227 profit-sharing schemes and 215 savings-related share option schemes, but it does not include schemes set up outside the provisions of the Finance Acts 1978 and 1980.

Mr. Carlisle: I welcome what the Government have done to spread profit-sharing schemes, because they can contribute to good industrial relations. Will my right hon. Friend do two things: first, get the Government to persuade more businesses to enter profit-sharing schemes; and, secondly, re-examine the possibility of extending the tax advantages of those schemes to small businesses, as at present they are available only to large companies?

Mr. Ridley: First, I have made pilgrimages to many cities to spread the good news about those schemes and I shall continue to do my humble best, as my hon. Friend has asked.
Secondly, there are three additional and major improvements in the Finance Bill, which I know my hon. Friend will support. I think that we have now provided a favourable regime. There is no impediment for small companies. The impediment is how to value the shares of small companies. The arrangements for the purchase of own shares in last year's Finance Act are a considerable help in that respect.

Mr. J. Enoch Powell: With reference to the Minister's introductory words, is he aware that the Chancellor of the Exchequer would be better occupied in the House answering questions than in Washington fixing up loans to sustain unsustainable regimes and unsound economies?

Mr. Ridley: The right hon. Gentleman knows full well that although that question may arise from the answer, it does not relate to the original question.

Family Taxation

Mr. Soley: asked the Chancellor of the Exchequer what has been the increase between 1978–79 and 1983–84 in the burden of direct tax, income tax and employees' national insurance contributions combined, as a percentage of income for a married man with two children, wife not working, on (a) average earnings and (b) three quarters average earnings.

The Chief Secretary to the Treasury (Mr. Leon Brittan): For a married man with two children, in 1983–84, the percentages of gross earnings taken in income tax plus national insurance contributions less child benefit are 22·6 per cent. and 17·1 per cent., respectively, at average and three quarters average earnings. Corresponding figures for 1978–79 are 21·2 and 15·1 per cent. This is an increase of 1·4 percentage points at average earnings and 2·0 percentage points at three-quarters average earnings.

Mr. Soley: As that represents increases of about £7 and £8 a week, respectively, if child benefit is taken out, is it not a classic case of the Tory party misleading the people? How does the Minister justify the Chancellor of the Exchequer's comments on 22 April 1979 that:
"personal taxation at all income levels must be substantially reduced."?

Mr. Brittan: That is well tilled territory, as hon. Members who have been present for debates on the Finance Bill will know.

Mr. Jack Straw: It is fertile territory.

Mr. Brittan: What really matters in the end is the take-home pay, which has increased at all levels for all sections of the community.

Mr. Horam: In the light of the Minister's answer to the hon. Member for Hammersmith, North (Mr. Soley), and the answer given to me recently by the Financial Secretary to the Treasury, that the total burden of taxation since the Government came to power has increased by the equivalent of 7p in the pound on the standard rate of income tax, which by any standards is a huge increase, what has been the effect of that increase in tax burdens on incentives?

Mr. Brittan: The hon. Gentleman will recall that one change in incentives, to which great importance should be attached, is the change in the basic and higher rates of income tax. That will have a considerable impact on incentives.

Mr. John Townend: Does my right hon. and learned Friend agree that his reply emphasises the need for the Government to redouble their efforts to reduce public expenditure so that they can further reduce taxation?

Mr. Brittan: I agree with my hon. Friend. I am not tempted to go down the path proffered by the Opposition, who blatantly say that we can finance increased spending and reduced taxes by borrowing. That is the road to disaster, and that is why the Opposition will not be followed by many people.

Mr. Shore: I am sure that the House will be grateful to the Chief Secretary for his candid admission that the burden of direct taxation has increased for families of average and below average size since the Government came to power. The House and the country will note the stark contrast between their performance and the most specific of their pledges before the 1979 general election.
To reinforce the point made by the hon. Member for Gateshead, West (Mr. Horam), I repeat the question that he put to the Chief Secretary. If the whole argument for reducing taxation was to increase incentives, what effect has the increase in direct taxation had upon those incentives? Increased taxation must have had a deleterious effect on work, output and incentives.

Mr. Brittan: I am surprised that the right hon. Gentleman should approach such matters as though he is hearing about them for the first time. He is well aware that the burden of income tax has been reduced for those on three quarters average earnings and above. That was made clear, despite the comments of the hon. Member for Blackburn (Mr. Straw), during the Finance Bill debates. As to income tax and national insurance contributions, the position is as described. The reductions in the basic and top rates of tax are a significant contribution to incentives. If the right hon. Gentleman is saying that we have not gone far enough, I agree with him. If he is proffering a package that he believes would allow us to go further, as I said, that could be done only by courting financial disaster through grossly increased borrowing.

Taxation (Husband and Wife)

Miss Joan Lestor: asked the Chancellor of the Exchequer whether he is now able to make a statement on Her Majesty's Government's consideration of implementation of the Green Paper on the taxation of husband and wife.

The Minister of State, Treasury (Mr. John Wakeham): The Government are considering this issue in the light of the wide-ranging views expressed in response to the Green Paper. No fundamental reforms will be introduced without giving Parliament and the public an opportunity to assess their detailed implications.

Miss Lestor: As the married man's allowance makes nonesense of the concept of equal pay, and bearing in mind that low-income families with children have borne a disproportionate burden of the increase in taxation under this Government, does the Minister agree that it would be

fair to transfer that allowance to child benefit and invalidity care allowance? The Green Paper contained little support for the concept of the transferable allowance.

Mr. Wakeham: The issues are complex, and reform may have significant distributional effects. I note from the Labour party's recently published plan that it, too, has not decided how to provide for the one-earner married couple with no dependants.

Sir Peter Emery: Will my hon. Friend ensure, when he considers this matter, that the taxation of the total income of a husband and wife is no greater than the taxation on a man and woman who have separate tax returns and may not be married?

Mr. Wakeham: I can add nothing more to what I have said. The issues are complex, and we must await the results of the Government's deliberations.

Personal and Corporate Taxation

Mr. Hooley: asked the Chancellor of the Exchequer what has been the trend since 1979 in the balance of taxation as between the taxation of personal incomes and the taxation of companies and corporations and the corporate bodies.

Mr. Wakeham: Both taxation on business and the burden of income tax on total personal income have been reducd by my right hon. and learned Friend the Chancellor. Since 1979 priority has been given to business, but both have been reduced in real terms. As is well known, national insurance contributions for employers and employees have risen, as have the benefits that they finance.

Mr. Hooley: Is the Minister aware that that is not a reply to my question? He talked about parallel trends, whereas I asked for the balance between the two trends. Will he confirm that the balance has shifted against the individual taxpayer, which is further evidence of the Conservative party's failure to honour pledges that it made before the general election?

Mr. Wakeham: I made it clear in my original answer that priority should be given to business in view of the general world economic position.

Mr. Robert Sheldon: Is not the serious problem that has now overtaken the low amount of revenue that we obtain from corporation tax directly connected with the £30 billion of unused capital allowances? That vast sum makes nonsense of the entire corporation tax scheme. What does the Minister suggest we could do to obtain from that sector of the economy the taxes that are due from it?

Mr. Wakeham: I do not agree with the right hon. Gentleman's analysis. The low return from corporation tax is due to the low profitability of British industry, which was a problem long before this Government came to office. The Government's policies will help industry, which will produce better profits and, therefore, a better yield from corporation tax.

Age Allowances

Sir Anthony Meyer: asked the Chancellor of the Exchequer what percentage of the single person's allowance and the married man's allowance has been


represented by the single person's age allowance and the married couple's age allowance in each of the past three years.

Mr. Ridley: In each of the past three years the single person's age allowance has been about 32 per cent. higher than the single person's allowance, and the married age allowance has been about 35 per cent. higher than the married man's allowance.

Sir Anthony Meyer: Is my right hon. Friend aware that retired people who live on non-index-linked pensions or accumulated savings from a lifetime of hard work have been hit harder by the wicked interplay of inflation and means-tested benefits than any other group in the community, and that they have more reason to be grateful to my right hon. and learned Friend the Chancellor for what he has done for them as revealed in those figures? Will my right hon. Friend urge the Chancellor of the Exchequer to continue in that direction in his next Budget?

Mr. Ridley: I am grateful to my hon. Friend. I agree with him about the importance of reducing inflation. By November the state pension will have increased by 75 per cent. against an expected rise in prices of 70 per cent. I also draw my hon. Friend's attention to the fact that although we have increased the national insurance contribution, on the whole income tax has not been increased. That has been a major benefit to pensioners, who do not pay national insurance contributions.

Economic Growth

Mr. Lennox-Boyd: asked the Chancellor of the Exchequer whether he will revise upwards his estimates for growth in the economy in the current year.

Mr. Brittan: The forecast published with my right hon. and learned Friend's Budget predicted growth of 2·5 per cent. in GDP between the second half of 1982 and the second half of this year.
Indicators for world output, industrial output, retail sales and business confidence since the Budget all provide encouraging confirmation that the economy is recovering. But these developments have not led us to revise upwards our projections for growth in the coming year.

Mr. Lennox-Boyd: Does my right hon. and learned Friend agree that the evidence of the recent survey by the Confederation of British Industry and other favourable signs are the reasons for the Opposition's desperate anxiety to have a June election, for fear that the position will be worse for them in the autumn?

Mr. Brittan: The anxiety is well placed, because the CBI's latest industrial trend survey shows encouraging improvements in business optimism. It is at the highest levels since 1976. That fact is reflected not only in the measure of optimism but in improved order books. Numerous other signs in the real world show that to be so. Just a few of the more benighted Opposition Members do not accept what is happening.

Mr. Richard Wainwright: Will the Chief Secretary inform the House of the Government's message to those British manufacturers whose plans to contribute to greater growth in the economy depend on a realistic international value of the pound sterling?

Mr. Brittan: The Government's job is not to give messages of the kind that the hon. Gentleman has in mind,

but to provide the right financial framework and the right balance of measures to encourage industry. The contents of the Budget were the best possible encouragement to industry, and especially to small businesses.

Mr. Shore: I am sure the House will consider that the right hon. and learned Gentleman's reply was well-judged in his refusal to increase his estimate for the growth of GDP, of 2 per cent. this year and 2·5 per cent. in the second half of this year, over the second half of 1984. I assume that the right hon. and learned Gentleman has read the recent quarterly report of the CBI, which states that 72 per cent. of British firms are operating below capacity and only 4 per cent. consider that they are short of orders. In the light of that survey, why is there so much apparent optimism in the economy and in Government statements? What is the basis for that optimism?

Mr. Brittan: The right hon. Gentleman's question is as good an example of scraping the barrel as we shall hear. He does not seem to challenge the fact that the economy is growing, but he welcomes the fact that the Government have not announced a faster rate of growth than they announced at the time of the Budget. As to the optimism, it is not difficult to understand why British industry should regard increasing order books and expectations as a good sign, as does the whole country. The only person who regards such optimism as a bad sign is the right hon. Gentleman.

Mr. Forman: Since growth in the economy in this and future years depends to a considerable extent on satisfactory non-inflationary growth in our partner countries, notably the Federal Republic of Germany and the United States, may I ask what proposals my right hon. and learned Friend the Chancellor of the Exchequer will be putting forward at Williamsburg to make that more likely?

Mr. Brittan: At Williamsburg my right hon. and learned Friend will be engaged in discussions designed to ensure that, wherever possible, the countries of the Western world adopt policies relating to inflation and budget deficits, thereby enabling the progress that is apparent in Britain, the United States and Germany to continue, not to be aborted.

Interest Rates

Mr. Nelson: asked the Chancellor of the Exchequer what assumption he made about the trend in levels of real interest rates when forecasting 2 per cent, growth in output in the current year in his Budget statement.

The Minister of State, Treasury (Mr. Barney Hayhoe): It is not Treasury practice to publish interest rate forecasts.

Mr. Nelson: Does my hon. Friend agree that interest rates in Britain are far too high compared with inflation and the average rate of return on capital employed? As sterling has recently improved its exchange value, can Britain look forward to early reductions in the minimum lending rate?

Mr. Hayhoe: Like my hon. Friend, I wish to see interest rates falling. Lower interest rates help industry, and I welcome the recent falls. I trust that, with the continued responsible financial policies of the Government, progress will be made regarding inflation and lower interest rates.

Mr. Jay: Is the Minister aware that real interest rates are much too high and that if the Government had not abandoned exchange control they would be a good deal lower?

Mr. Hayhoe: I am by no means sure that what the right hon. Gentleman says is true. Those who seek to forecast interest rates often come a cropper. I have little confidence in the presumed forecast that the right hon. Gentleman is making.

Capital Stock

Mr. R. C. Mitchell: asked the Chancellor of the Exchequer by how much he estimates British capital stock will have increased by 1985 as a consequence of North sea oil, using as a basis the National Income and Expenditure Accounts, section 11.

Mr. Wakeham: The total gross United Kingdom capital stock at 1975 replacement cost was about £550 billion at the end of 1981. On the basis of rough projections of total fixed investment, the gross addition to the capital stock is expected to be of the order of £80 billion by the end of 1985. It would be impossible to say how much of any increase could be attributed to North sea oil.

Mr. Mitchell: Does the Minister agree that part of the benefits of North sea oil ought to be passed on to our children and grandchildren, but, because of the Government's economic mismanagement, especially the effect that North sea oil revenues have had on the exchange rate, that is highly unlikely to happen unless there is a rapid change in policy?

Mr. Wakeham: I disagree with the hon. Gentleman. The Government's policy is not to fritter away North sea oil revenues on consumption; it is exactly the opposite. Reduction of the PSBR means lower interest rates and more room for the private sector to borrow and invest. The private sector is the best judge of how much and where to invest and of how many of the benefits of North sea oil should pass to future generations.

Mr. Eggar: Is not the entire North sea saga, and the increase in the capital stock, a fine tribute to the work of the private sector? Should not my right hon. and hon. Friends be congratulated on the decrease in oil companies' taxation in the Budget?

Mr. Wakeham: I am grateful to my hon. Friend. The changes for North sea oil taxation announced in the Budget have been well received and are showing signs of increased development, which means further jobs and investment in the North sea.

International Debt

Mr. Skinner: asked the Chancellor of the Exchequer when he next intends to meet bankers to discuss the rescheduling of international debt; and if he will make a statement.

Mr. Ridley: My right hon. and learned Friend the Chancellor of the Exchequer regularly meets the Governor of the Bank of England and other bankers to discuss international debt problems. The subject will be considered further at a variety of international meetings in the coming month including the IMF/IBRD development committee today and tomorrow.

Mr. Skinner: As the Government have encouraged British banks and others to bail out Argentina by providing a giant second mortgage—and perhaps a third later on—and have allowed Argentina to buy weapons of war with that money, will the Financial Secretary confirm that the meeting that the Chancellor is presently attending will try to respond to yesterday's meeting between the Presidents of Brazil and Mexico, which have a giant £170 billion total debt to foreign banks? Indeed, 16 per cent. of Mexico's debt is to Britain. Will the right hon. Gentleman rule out the possibility of the Government allocating further money, in the form of debt rescheduling to British banks, thereby allowing those dictatorships to buy arms, to have lower interest rates and to dictate their own repayment terms?

Mr. Ridley: The hon. Gentleman has learnt nothing from past experience. Does he not remember that when the IMF had to bail out the Labour Government it imposed extremely strict conditions on the management of the economy? The strict conditions that are imposed on Argentina, or any other country for that matter, will prevent irresponsible economic policies and restrict the amount of money available for the purchase of arms.

Mr. J. Enoch Powell: What is the point of organising new loans to those countries which cannot or will not service their present loans?

Mr. Ridley: I should have thought that the right hon. Gentleman, of all people, would not have wished the Government to interfere in the private activities of private banks.

Mr. Higgins: Has my right hon. Friend read the rather under-publicised report of the Treasury and Civil Service Committee on international lending by banks? Will he give the House an assurance that the Government's response to the report will be given before the Williamsburg conference?

Mr. Ridley: I shall certainly draw that point to the attention of my right hon. and learned Friend the Chancellor of the Exchequer.

Unemployment Costs

Mr. Frank Allaun: asked the Chancellor of the Exchequer what is the approximate weekly loss to the Government of having a worker on average earnings unemployed, accounting for unemployment benefit, social security, income tax on earnings, national insurance contributions and other items.

Mr. Andrew F. Bennett: asked the Chancellor of the Exchequer what is the most recent estimate of the cost of an extra 10,000 unemployed in terms of benefits paid out and income taxes lost.

Mr. Hayhoe: Additional benefits would depend on the family circumstances of those becoming unemployed. But an extra 10,000 unemployed in 1983–84 would, on average, increase expenditure on benefits and administration by about £18·5 million, or £1,850 per person.

Mr. Allaun: Would it not be better to pay people to work rather than to pay them to stay on the dole? As the average wage is now £145·20 per week and the cost to the Chancellor of an unemployed person is £111 per week, is


it not true that for a small sum those unemployed people could be producing houses, education and health services, and re-equipping the industry that this country needs?

Mr. Hayhoe: The position is not as the hon. Gentleman surmises. The figures that he has given for what he would describe as lost revenue are inaccurate, because changes in revenue depend on the economic circumstances in which rising unemployment takes place. There is no way in which a single figure can be given for that.

Mr. Bennett: Why are the Government so coy about telling us the real cost of an unemployed person for the first 12 months? Does it not cost the Government somewhere between £5,000 and £6,000 per year? Would it not be far better to let those people do a useful job of work instead of paying them to be unemployed? Should not the Government now come clean and tell us the real figure instead of trying to pull a veil across it and mislead the House and the country?

Mr. Hayhoe: Contrary to the hon. Gentleman's suggestion, there is no real figure. The only figures that can be produced relate to hypothetical changes in personal taxation based on strictly limited and arbitrary assumptions. There is no genuine, real figure.

Mr. Adley: Bearing in mind the figures given by my hon. Friend and the hon. Member for Salford, East (Mr. Allaun), am I right in assuming that what my hon. Friend said is that the figure of £1,850 compares with the hon. Gentleman's figure of something in excess of £7,000? Is it my hon. Friend's understanding of the position that the TUC would be willing to see people work for £1,850 per year?

Mr. Hayhoe: That is an interesting point. However, I should make it clear that my figure of £1,850 related to additional expenditure on benefits and administration and was an average figure.

Mr. Hoyle: Does the Minister agree that having to spend more than £5,000 a year per person on unemployment benefit and so on represents a condemnation of this Government's economic policies? Before long, the Government will have to answer to the electorate for the disasters that they have brought upon this country.

Mr. Hayhoe: I shall be happy to answer to the electorate at any time that my right hon. Friend the Prime Minister may choose.

Mr. McCrindle: In that context, has my hon. Friend received any representations from Opposition members or trade unions about the possibility of job-sharing?

Mr. Hayhoe: I have not received any representations about that. However they would more properly be made to my right hon. Friend the Secretary of State for Employment.

Mr. Straw: Why is the Minister trying to cover up the true cost of unemployment to the country? If the Manpower Services Commission can estimate that unemployment costs £5,000 per head, why cannot the Government also make such estimates? Is not the truth of the matter that the additional 2 million people that the Government have thrown on to the dole have cost the country £40,000 million, which is well in excess of the £32,000 million that Britain has earned in revenues from the North sea.

Mr. Hayhoe: The Government are not giving an estimate because, as I have said, no genuine reasonable estimate can be given. The hon. Gentleman is trying to get a single snapshot of an essentially dynamic situation. As he should know, that single snapshot would be very misleading.

Economic Recovery

Mr. Knox: asked the Chancellor of the Exchequer whether there have been any further signs that the economy is recovering from the recession.

Mr. Brittan: Over recent weeks a number of encouraging indicators have been published, pointing to modest economic recovery. These include evidence that manufacturing production is increasing—up 1 per cent. in the three months to February on the previous three months; the continuing growth in total output, now 2 per cent. higher than in the spring of 1981; and a substantial improvement in business confidence.

Mr. Knox: What effect does my right hon. and learned Friend think the change in the exchange rate of recent months will have on the economy? In particular, what will be its effect on jobs and growth, and how quickyy will it be felt?

Mr. Brittan: It is, I think, impossible to be precise. However, the reduction in the value of the pound since last summer has plainly provided opportunities to British exporters. It would also lead to a risk of inflation if it went further in that direction.

Mr. Joel Barnett: With the Government's present economic policies, how do they expect to sustain even the present modest recovery without an increase in inflation?

Mr. Brittan: I do not believe that the policy that we have followed, of a restraint on monetary growth—which has led to a fall in inflation—will be reversed. Indeed, the right hon. Gentleman should know that the increase in activity that I have described is the result of the success of those policies. If we were to reverse them, the increase in production and output would no longer be continued.

Mr. Richard Wainwright: When will the Chief Secretary give some reassurance to those informed economists who already see the beginning of the next recession, by taking steps with the money supply to reduce the real rate of interest, which is now extravagantly high?

Mr. Brittan: The hon. Gentleman is looking further ahead than he can see.

Mr. Dorrell: Is it not clear to my right hon. and learned Friend that the fluctuations in the exchange rate in the past two years have been a major impediment to the growth of world trade? As this country relies so heavily on an expanding basis of world trade, is it not vitally in our interests to work with our European and North American partners for greater exchange rate stability?

Mr. Brittan: I agree that we should seek to work with our European and American partners and to persuade them — as we have largely been successful in doing — to pursue policies on inflation and budget deficits that will lead to more stability in the exchange rates.

Mr. Cook: If the Chief Secretary is so convinced that a recovery is under way, will he tell us when


manufacturing investment will rise by 37 per cent., back to its level in 1979; when manufacturing output will rise by 22 per cent., back to its level in 1979; when bankruptcies will fall by 67 per cent., back to the level in 1979, and when unemployment will fall by 2 million, back to its level in 1979? If he cannot answer that, will he at least spare the House his smug satisfaction at the unique ruin that his policies have brought to British industry?

Mr. Brittan: If the hon. Gentleman is trying to tell us that there has been a recession, he need not take the trouble, because we are well aware of that. However, if he is also trying to say that he finds it—for some reason that wholly eludes me—depressing to see a recovery in economic activity, I must tell him that neither the House nor the country shares his view.

£1 Coin

Mr. Neubert: asked the Chancellor of the Exchequer what is the number of £1 coins currently in circulation.

Mr. Ridley: It is rather too early to say how many are now in circulation, but some 62·8 million had been issued to the banks by 27 April.

Mr. Neubert: As, when begrimed by use, its size and weight will make it easily confused with other small change, is not this pseudo-sovereign a very unsatisfactory little coin? As the Government are committed to low inflation and honest money policies, would it not be appropriate to mark their achievements by redesigning the whole range of coinage, replacing some coins and retaining others, so that weight, size, shape and colour are in a logical relationship?

Mr. Ridley: My hon. Friend is an expert in these numismatic matters. However, the life of the new coin is thought to be 40 years, and that means that it will last longer than he suggests. After all, the sovereign has been with us for many hundreds of years. It was the coin of equivalent value in nominal terms, although in real terms it has increased greatly in the past few hundred years. I commend the new coin to my hon. Friend in the hope that he will find that people become used to it and find it easy to use, and find that it represents a useful addition to our currency.

Mr. Skinner: Will the new £1 coin drop through the hole in the pocket?

Mr. Ridley: That depends upon whether the hon. Gentleman keeps his trousers in order.

Mr. Cockeram: Now that we have a coin for the former £1 note, will my hon. Friend demonetarise that irritatingly small coin the ½p, which has a purchasing power less than that of the former farthing?

Mr. Ridley: Although the House would like to think that the life of the ½p is limited, there are no present plans to phase it out.

Tax Allowances

Mr. Michael McNair-Wilson: asked the Chancellor of the Exchequer whether he is satisfied that the tax allowances proposed in his Budget benefit married couples more than single persons living together.

Mr. Wakeham: The single and married personal allowances were increased by about the same percentage in the Budget, so the relative position of married couples and single people living together is broadly unchanged. This is one of the issues that is being considered in the context of the Green Paper on the taxation of husband and wife.

Mr. McNair-Wilson: Will my hon. Friend confirm that, thanks to the raising of the additional personal allowance in the Budget, an unmarried couple with children are approximately £6 a week better off than a married couple in the same circumstances? If that is the case, will he remove this anomaly forthwith so that those who may be tempted to beat the taxman do not choose living in sin as a way of doing so?

Mr. Wakeham: There is no evidence that couples choose not to marry, or to get a divorce, to take advantage of the tax rules. Nevertheless, I agree that the present position is open to criticism in a number of respects. The treatment of cohabitating parents is one of the unsatisfactory aspects and is being considered in the Green Paper.

Mr. Horam: Does the hon. Gentleman agree with the Association of Conservative Women that the married man's tax allowance should be abolished?

Mr. Wakeham: This is one of the matters that the Government are considering in the Green Paper. I do not wish to add anything further.

European Community (Budget Refund)

Mr. Marlow: asked the Chancellor of the Exchequer what powers are held by the European Assembly with regard to the United Kingdom budget refund.

Mr. Ridley: The European Parliament's budgetary powers are set out in article 203 of the EC treaty.

Mr. Marlow: If at some time the scandal of the United Kingdom budget contributions to the European Community should be resolved with the other nation states of Europe, and if at that time the European Assembly should see fit to try to involve itself, will my right hon. Friend tell it to get knotted?

Mr. Ridley: I doubt whether using my hon. Friend's suggested language would assist in the process of securing a longer-term solution to the budgetary imbalances of Europe. On the other hand, both we and the European Parliament attach the greatest importance to achieving just such a solution.

National Economic Development Council

Mr. Lofthouse: asked the Chancellor of the Exchequer when he next expects to discuss the United Kingdom's economic prospects with the National Economic Development Council.

Mr. Brittan: Future NEDC agendas have not been firmly fixed but ways of improving our economic prospects are discussed at every council meeting.

Mr. Lofthouse: Does the Chief Secretary recall that at a meeting earlier this month NEDC said that there were no prospects of an increase in jobs in either the industrial


or service sectors of industry during the course of this decade? Why do he and the Chancellor think that it was wrong?

Mr. Brittan: One of the reasons was that the sector committees, whose views were reflected in the report to which the hon. Gentleman referred, cover only about one third of the economy.

Mr. Budgen: Will my right hon. and learned Friend point out to NEDC that recently the west midlands has derived considerable advantage from the 13 per cent. fall in the sterling exchange rate and that the west midlands is prepared to support even the present very high level of interest rates if that is necessary to constrain any increase in the money supply, but is emphatically not prepared to support these levels of interest rates to sustain an uncompetitive rate of sterling?

Mr. Shore: Does the Chief Secretary recall that the last time he met and had discussions with the NEDC on the most far-reaching report that it had had before it since the formation of the Government, the general conclusion of the 30 sector committees that drew up the report was that there would be no increase in employment, on present policies, between now and 1990? What response will the Government make to this serious condemnation of their policies and the appalling prospects that lies ahead?

Mr. Brittan: As the right hon. Gentleman knows well, the view of the Government and the CBI is that the report was unnecessarily gloomy and that the sector committees whose work was reflected in that report had probably taken insufficient account of a number of recent favourable developments, including the rapid fall in inflation and the vast growth in industrial productivity.

Oral Answers to Questions — PRIME MINISTER

Engagements

Q 1. Mr. Tony Speller: asked the Prime Minister if she will list her official engagements for Thursday 28 April.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. After my duties in the House I shall be leaving for an official visit to Sheffield and the east midlands.

Mr. Speller: I welcome my right hon. Friend's achievement in getting inflation down to its lowest level for 15 years and in getting realistic wage settlements. None the less, will she accept that the real rate of interest is the greatest disincentive to borrowing and business? Furthermore, will she accept that while labour and capital-intensive businesses such as agriculture, catering and manufacture are doing well on other fronts, the real cost of borrowing is the greatest disincentive to investment and prosperity?

The Prime Minister: I share my hon. Friend's views on the importance of interest rates, and I agree that low inflation and low interest rates provide the right framework for recovery. As inflation falls further, so real interest rates, which are slightly high at the moment, will continue to come down.

Mr. Beith: Will the Prime Minister spend any time today on her plans for the rating system? Will she promise

to abolish the rating system, and if so, will it be on the basis of the plans that she had in mind when she last made such a promise, or will she promise merely to reform the rating system?

The Prime Minister: There was no pledge to abolish rates in the last election manifesto—[Interruption.] In the last manifesto we clearly said—

Mr. Skinner: Speak up.

The Prime Minister: —that the reduction in income tax would have to come first. The hon. Gentleman will have to wait to see exactly what we say about rates when the time comes.

Mr. Chapman: asked the Prime Minister if she will list her official engagements for Thursday 28 April.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Chapman: The hon. Member for Berwick-upon-Tweed (Mr. Beith) spoke of rates. Will my right hon. Friend take time today to look at recently published statistics which show that the average rate poundage of Labour-controlled London boroughs is no less than 50 per cent. higher than for Conservative-controlled boroughs? Is my right hon. Friend aware that the equivalent figure for the metropolitan counties is 25 per cent., as it is in the shires? Does my right hon. Friend agree that the best advice to people is to vote Conservative at the local elections next week if they want to keep their rates down?

The Prime Minister: As my hon. Friend points out, there are many Labour-controlled local authorities that are big spenders of other people's money. This year, the 18 largest over-spenders are all Labour-controlled authorities. I agree with my hon. Friend that it is the duty of councillors to be careful how they spend ratepayers' money and to see that the ratepayers get value in every aspect of the councils' work.

Mr. Foot: If the right hon. Lady is now showing a renewed interest in the rating system, will she tell us by how much rates have increased under her Government?

The Prime Minister: Too much, especially in Labour-controlled authorities.

Mr. Foot: Have not the rates increased in general throughout the country under her Government by 75 per cent.? By how much would that have been reduced had she not cut the rate support grant?

The Prime Minister: The rates are highest in Labour-controlled authorities. This year the 18 largest overspenders are all under Labour control. Among the 18 largest overspenders are the GLC, ILEA, the west midlands, Greater Manchester, Avon, Merseyside, Southwark, Sheffield, Derbyshire, Humberside, Greenwich, Tyne and Wear, Harringey, and South Yorkshire—all Labour-controlled. Labour loves spending other people's money.

Mr. Foot: Will the Prime Minister help us by saying how much the rates have increased in Surrey, which is controlled by the Conservatives?

The Prime Minister: They are much too high in Surrey this year. They are too high in many authorities One of the ways of trying to reduce public expenditure in the local


authorities was the new rate support grant system. On average, rates are increasing this year by 6·5 per cent. Had the two biggest spenders—the GLC and ILEA—spent at their target there would have been, on average, virtually no rate increase this year.

Mr. Trippier: asked the Prime Minister if she will list her official engagements for 28 April.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Trippier: Has my right hon. Friend had time to study the essay that was written by the right hon. Member for Leeds, East (Mr. Healey) in the book called "Renewal. Labour Britain in the 1980s"? Does she not find it strange that in an essay on foreign affairs he never referred once to Labour's policy of withdrawal from the Common Market or the removal of nuclear weapons and bases? Does she agree that it would be far better if the right hon. Gentleman came clean and renounced those policies, which he knows will be a complete disaster for Britain?

The Prime Minister: I agree that it would be a complete disaster to withdraw from Europe or to abandon our nuclear weapons. The former would have a devastating effect on British industry and the latter would mean that we were not properly able to defend ourselves.
I have not read the essay of the right hon. Member for Leeds, East (Mr. Healey). I do not follow these matters meticulously. But I do not share my hon. Friend's surprise. The right hon. Gentleman seems always to accommodate his views to those of the Labour party, whatever they may be.

Mr. Ashley: Does the Prime Minister agree that some of the saddest sights that we have seen in the past few days have been the enforced sale of the Victoria Cross by the widow of a second world war soldier and the requests by widows of men in earlier wars to visit the graves of those men? Will the Prime Minister consider initiating an urgent and wide-ranging review of the problems of widows of those wars so that they can be given the same kind of consideration, kindness and compassion as has been properly shown to the widows of soldiers in the Falklands campaign?

The Prime Minister: As the right hon. Gentleman will be aware, the Government's record in improving the lot of war widows has been unsurpassed by any other Government, including that which the right hon. Gentleman supported, both in terms of the special increases that we have given for old age and in that we have completely taken war widows out of taxation.
It is very sad that the Victoria Cross has been sold. We have looked into that case and Mrs. Nicholson was visited. She was awarded a war widow's pension after her husband's death in the last war, with an increase for her son. Later in life, her son's school fees were met under the war pension scheme. In addition to the standard war widow's pension she has had some help from the RAF benevolent fund. She also has a rank allowance and an age allowance. We were not aware that she needed any further money.
I repeat that we have an excellent record on caring for war widows and I imagine that the excellence of that record will continue in future.

Mr. Adley: asked the Prime Minister if she will list her official engagements for 28 April.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Adley: Is my right hon. Friend aware that in two recent evenings' canvassing with the excellent Conservative candidates in the Grange ward of Christchurch, which has the largest council house estate in my constituency, I came across a number of erstwhile Labour voters who expressed their grave concern and disillusionment with the Labour party's policy of support for the CND? Therefore, will she do everything that she can to encourage comrade Kent and his Socialist cohorts to keep defence at the forefront of our political debate?

The Prime Minister: I agree with my hon. Friend. We shall indeed keep defence matters at the forefront of debate. They are vital to the security of our way of life and the British people. They are also vital to our international standing and I hope that there will soon be a full debate in the House on those matters.

Mr. Tom Clarke: asked the Prime Minister if she will list her official engagements for Thursday 28 April.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Clarke: Is the Prime Minister aware that there is widespread concern in Scotland about recent further remarks of the Secretary of State for Defence? Is she aware that distinguished representatives of the Church of Scotland, the Episcopalian Church and the Catholic Church took grave exception to his smear upon the peace movement? Will the Prime Minister use her influence to encourage the right hon. Gentleman to raise the standard of this important debate to a level that it is entitled to expect?

The Prime Minister: With regard to the head of any Church, my right hon. Friend has had no conversation with either Cardinal Hume or — [HON. MEMBERS: "Answer the question."] I am giving the facts. Just because the Labour party does not like them does not make them any less the facts.
My right hon. Friend has had no such conversations, either with Cardinal Hume or indeed the head of any other Church or religious organisation. That answers the first part of the hon. Gentleman's question.
On my right hon. Friend's other revelations about the leaders of CND, I fail to see that anyone can be blamed for revealing the facts.

Mr. Maxwell-Hyslop: Does my right hon. Friend agree that the most unchallengeable credential for leading a peace movement is to have been responsible for carrying out policies that have preserved peace? In doing that, my right hon. Friend and the preceding five Prime Ministers, who have kept Britain in NATO with nuclear weapons defending that Alliance have shown that they lead the true peace movement for preserving peace between East and West.

The Prime Minister: I agree wholly with my hon. Friend. Nuclear weapons are a part of the NATO balance, which has kept the peace for some 38 years. People should be very slow to discard it before they find something that can keep the peace equally well. We are the true peace movement.

Mr. R. C. Mitchell: asked the Prime Minister if she will list her official engagements for Thursday 28 April.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Mitchell: Will the Prime Minister find time today to issue instructions to stop the practice of some jobcentres calling young unemployed people for interview when they arrive find that, without warning, they are being interviewed by a psychologist? Is not the degradation of unemployment that has been caused by the Government quite sufficient without implying that young unemployed people are in some way psychologically disturbed?

The Prime Minister: I can understand what the hon. Gentleman is saying and the impact behind his words. It is the work of jobcentres to try to place young people either in training or in jobs. If the hon. Gentleman has any

particular case in mind, perhaps he will draw it to my attention and I shall see that it is fully and promptly dealt with.

Mr. Mark Carlisle: With regard to my right hon. Friend's answers on nuclear disarmament, has she had time to see the report in today's newspapers to the effect that the Labour party, in its advertising campaign, does not propose to refer to its policy of unilateral nuclear disarmament? As the Leader of the Opposition thinks that it will be the main issue at the next election, does not my right hon. Friend find it extraordinary that he does not wish to put the issue before the public?

The Prime Minister: Yes, I have seen those reports, but I think that the true face of the Labour party has been revealed in its document and in the sayings of many of its people. The Labour party is unilateralist, which means that it is prepared to play with the defence of Britain and abandon nuclear weapons, wherein lie our true security.

Business of the House

Mr. Michael Foot: Will the Leader of the House state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. John Biffen): The business for next week will be as follows:
MONDAY 3 MAY and WEDNESDAY 4 MAY—

Mr. William Hamilton: Wrong again.

Mr. Biffen: I will be careful never to make a worse mistake. The business for next week will be as follows:
TUESDAY 3 and WEDNESDAY 4 MAY—Progress on remaining stages of the Police and Criminal Evidence Bill.
At the end on Wednesday, consideration of Lords Amendments to the Water Bill.
THURSDAY 5 MAY—Remaining stages of the Mobile Homes Bill (Lords) and of the National Heritage Bill.
Motion on the St. Christopher and Nevis Termination of Association Order.
FRIDAY 6 MAY—Private Members' Bills.
MONDAY 9 MAY—Completion of remaining stages of the Police and Criminal Evidence Bill.

Mr. Foot: The Government's proposals for dealing with the Police and Criminal Evidence Bill are not adequate to allow the House and the country to consider the matter properly. Apparently, more than 150 amendments will be introduced by the Government. The House will want to consider them and the country is entitled to consider them. The Government have had to retreat on many of their propositions on this matter. Surely they should be prepared either to withdraw the whole Bill and resubmit it in Committee or at any rate to give us substantially more time than is proposed at the moment.
I have two or three other matters to put to the right hon. Gentleman. First, we are still waiting for a statement on Ravenscraig, the future of the steel industry and the corporate plan. Will the right hon. Gentleman give an assurance that there will be a statement in the very near future? We have had a series of statements from Mr. Ian MacGregor on different aspects of the matter but no clear statement from the Government. There are great fears at Ravenscraig and at other plants. I hope that the right hon. Gentleman will consider that.
When may we expect a debate on the third report of the Services Committee? I understand that there have been conversations about the new building in Bridge street. We should like to know when that debate will take place.
Finally, and most important of all, with regard to the matters raised a few moments ago in the exchanges across the Floor of the House, the Opposition have been eagerly pressing for many weeks past, and increasing the pressure, to have a full debate on defence and disarmament. We hope that the Government will be able to tell us soon when that debate will take place. We believe that much the best way to deal with such a pre-eminent matter is to have a full debate in the House. We hope very much that that can happen soon.
In the meantime, in the light of the statements made this morning by President Reagan and the announcement of a fresh approach to policy, a most important aspect of policy and one which concerns us in this country and the whole peace of the area, may we have a statement on whether the Government were consulted before President Reagan

made his statement, and whether they have made any representations about it? Have the Government done anything to uphold their commitment and allegiance to the charter of the United Nations and to prevent any moves towards settling disputes by aggression? We thought that the House was committed on this matter. We should like a statement from the Government so that we can cross-examine them on their attitude. Have they made representations about Nicaragua, E1 Salvador and the other countries involved? We believe that extremely important questions about human rights and the protection of world peace are involved. We believe that the Government should make a statement to the House about what consultations have taken place between Her Majesty's Government and the American President.

Mr. Biffen: Considerable debate is offered next week on the Police and Criminal Evidence Bill, in the context of the Committee stage which has lasted four months and 41 sittings. While it is true that a large number of Government amendments have been tabled, a substantial number of them are technical. Therefore, I believe that what is provided is reasonable in the circumstances.
On the right hon. Gentleman's second point, I gladly repeat what I have already said, that my right hon. Friend the Secretary of State for Industry will make a statement on the corporate plan for the steel industry as soon as he can.
On the right hon. Gentleman's third point, about the Bridge street building and the recommendation of the Services Committee, I pointed out last week to my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) that I hoped that we would soon be able to debate the matter.
I note the right hon. Gentleman's request that we should have a full debate on defence. I can gladly give him that undertaking, particularly in the light of what my right hon. Friend the Prime Minister said earlier this afternoon.
I will draw to the attention of my right hon. Friend the Foreign Secretary the right hon. Gentleman's concern that a statement should be made on the British Government's attitude to President Reagan's statement earlier today, but that would cover points that could also be included in the defence debate. It appeared to me that the right hon. Gentleman, in his comments on President Reagan's policies, displayed some paranoia towards and suspicion of the United States, which is likely to spill over into the sensible governing of the use of the House of Commons time.

Mr. Foot: The right hon. Gentleman has no grounds for making such slurs. This matter is being widely debated in the United States. Great concern has been expressed in the United States Senate and House of Representatives. For the right hon. Gentleman to suggest that any criticism of the President of the United States' statement on this matter amounts to paranoia is a criticism of a wide section of American opinion. Our concern is that the charter of the United Nations should be sustained in Latin America and that there should be no aggression and no resort to covert aggression. This House and this country have an obligation to uphold the charter of the United Nations. On that aspect of the matter alone, a statement is justified. In any case, I hope that the right hon. Gentleman will accept our representations. We do not think it desirable that this matter should be included in a general debate. We think


that the Government should make a statement on their attitude and whether they have been consulted and, if so, what views they expressed.
With regard to the Police and Criminal Evidence Bill, we insist that the way the right hon. Gentleman proposes to proceed with the debate is not satisfactory. However, my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) will ask questions in a moment about some of the clauses.

Mr. Michael Hamilton: On a point of order, Mr. Speaker. Would it be possible during business questions to keep Members' questions more closely related to next week's business?

Sir Anthony Kershaw: On a point of order, Mr. Speaker. I realise that the Leader of the Opposition is entitled to considerable latitude, but is he not taking great advantage of his position in delivering a mini-Foreign Office speech during business questions?

Mr. Speaker: It is long established that we allow extra latitude to the Leader of the Opposition.

Mr. J. Enoch Powell: As the defence debate, which is so warmly desired by both sides of the House, was being arranged a fortnight ago, why is it necessary for three weeks at least to have passed before the debate can be arranged? Is there some arrangement or conspiracy between the two Front Benches to delay the consideration of this subject by the House?

Mr. Biffen: I should have thought that the warmth displayed by the Leader of the Opposition and myself a few moments ago might have disarmed any ideas about a conspiracy. It is true that we sought to provide a debate that would be at a convenient time, and I hope that that can be quite soon.

Sir Kenneth Lewis: Is my right hon. Friend aware that some of us on the Back Benches have often thought of questions to the Leader of the House on a Thursday, except for when the time is dominated by the Leader of the Opposition, as a sort of workers' playtime? Business questions enable us, the workers on the Back Benches, to learn what the business will be for next week, and to play the field. As we now have a Minister with responsibility for children's play, will the Leader of the House tell me when we are to have children's playtime and questions to the Minister who has been given this new responsibility for children's play?

Mr. Biffen: There must be a witty riposte to that, but mercifully I cannot think of it.

Mrs. Shirley Williams: Will the Lord President consider planning time for a debate on political education in schools? A questionnaire on political education is being sent to London schools which, while unexceptionable in the sense that most of us want to see our children educated in democracy, is objectionable because the ILEA is dominated by one party. This is an urgent matter and I ask him to find time to enable the House to discuss it next week.

Mr. Biffen: I am sure that the right hon. Lady has raised a topic of real interest. I can offer no Government time for such a debate next week, but it is just possible that she might be successful in raising the issue in an Adjournment debate.

Mr. David Crouch: Will my right hon. Friend be prepared to make a statement next week on the date of the Whitsun recess? I was planning to take a few days holiday in early June.

Mr. Biffen: Weren't we all.

Mr. Jack Dormand: Have the Government yet received the report of the Top Salaries Review Body, which the right hon. Gentleman will recall was due this week? How soon after receiving the report does he intend to have a debate?

Mr. Biffen: I take it that the hon. Gentleman is referring to the review body that has been considering the pay of Ministers and Members of Parliament. I understand that the report has not yet been received.

Mr. Michael Latham: Did my right hon. Friend notice that the Leader of the Opposition asked for a debate on defence and disarmament? Is he aware that Conservative Back Benchers think that the debate should be on defence and disannament as the two issues are closely related? Such a debate will enable the Government to put forward their strong views on nuclear defence and nuclear weapons, which have wide support in the country.

Mr. Biffen: I note with appreciation the general desire for such a debate. I only wish that I were able to arrange it as soon as the House would desire.

Mr. Gordon Wilson: Does the right hon. Gentleman realise that his response to the Leader of the Opposition on the future of the Ravenscraig steelworks was inadequate? Will he give an undertaking, in view of the reports that the Prime Minister has swung her weight behind the BSC scheme to butcher Ravenscraig, that a statement will be brought before the House within the next week and that there will be a debate on the subject before any decision is taken?

Mr. Biffen: I shall draw the hon. Gentleman's remarks to the attention of my right hon. Friend the Secretary of State for Industry.

Mr. John Roper: The right hon. Gentleman assured me last week that he hoped to be able to arrange a debate on arms control and disarmament for the coming week. Can he give an assurance that there will be such a debate, and that it will not be combined with the normal annual debate on the defence Estimates?

Mr. Biffen: I very much hope that that should be so.

Mr. Peter Bottomley: As there is great interest in the House in this subject, will my right hon. Friend allow a debate to take place on the timing of the next general election? A growing number of parties seem to be saying that they are ready for a general election, and I certainly am.

Mr. Biffen: I have always understood that constitutionally that was a matter of Executive decision.

Mr. Hugh D. Brown: Is the Government's commitment on rates to the abolition of domestic rates, or has it changed into something vague like the reform of the rating system? Is it not about time that we had a statement on the matter, preferably next week?

Mr. Biffen: It is not my responsibility to provide the clarification that the hon. Gentleman seeks, but I will draw the attention of my right hon. Friend the Secretary of State for the Environment to the question that he has put to me.

Mr. Harry Greenway: I revert to the appointment of a Minister with responsibility for children's play, which was referred to by my hon. Friend the Member for Rutland and Stamford (Sir K. Lewis), and which is a welcome appointment. If the House is not to have the opportunity regularly to question the Minister responsible, may we have an early statement on what his duties are? Will he bring together, for example, play centres, playgroups and nursery education, or will he be responsible for more general matters? Finally, what will his resources be? May we have an early statement?

Mr. Biffen: A statement was made on the occasion of my hon. Friend's appointment. I shall pass my hon. Friend's questions to my right hon. Friend the Secretary of State for the Environment in the hope that they can be answered in a way that will give him satisfaction.

Mr. Jack Ashley: Did the Leader of the House notice that, although the Prime Minister was sympathetic, she did not give an undertaking to initiate a review of war widows' pensions and the requests of war widows to visit the graves of their husbands? Will the right hon. Gentleman allow us to discuss this urgent and important matter next week?

Mr. Biffen: I thought that my right hon. Friend the Prime Minister gave a comprehensive answer, and I really cannot go beyond that.

Mr. John Townend: Is my right hon. Friend aware that I have been joined by the hon. Member for Bethnal Green and Bow (Mr. Mikardo) in having no telephone facilities due to the refusal of the engineers to repair Members' telephones as a protest against the Telecommunications Bill? Does he agree that this is improper pressure on Members of Parliament? Will he consider privatising the repairs service, and will he arrange for a statement to be made next week?

Mr. Biffen: The situation is unsatisfactory and I am looking into it. I shall be in touch with my hon. Friend.

Mr. David Stoddart: Has the Leader of the House seen early-day motion 445 on the probation service, which was tabled by the hon. Member for Cheltenham (Mr. Irving) and signed by 75 other hon. Members?
[That this House is astonished and disturbed by the decision of the Home Secretary to cut the rates of pay of trainee probation officers; finds it impossible to reconcile this decision with the Government's declared support for the Probation Service as an integral part of the Criminal Justice System, in particular at a time of critical prison overcrowding; and is greatly concerned to protect the future of the Probation Service and alarmed that the future must be jeopardised by reducing the pay of its recruits by as much as 25 per cent.]
The motion concerns the disgraceful treatment of trainee probation officers, whose pay has been cut by an enormous amount. Does he realise that this is a responsible service that needs mature people who have been trained, and therefore requires its trainees to be paid reasonable salaries? Is it not a disgrace that market forces should be used to determine the pay of probation officers? Will he arrange for his right hon. Friend the Home Secretary to make a statement next week?

Mr. Biffen: I happily join the hon. Gentleman in paying tribute to the work of the probation service.

However, I cannot accept his somewhat partisan description of Government policy. I can offer no prospects of a Government statement next week.

Mr. Tony Marlow: Since my right hon. Friend is a doughty champion of the constitutional rights and duties of the House, since his right hon. Friend the Secretary of State for Employment is not empowered to vary or change the code of practice recently issued by the Commission for Racial Equality, and since this has the gravest implications both for the bureaucratic burdens on business and race relations in the country, will he confirm that this elected assembly will be permitted to debate this issue before it becomes the law of the land? If not, why not?

Mr. Biffen: I cannot so guarantee. I shall look into the matter. However, I believe that my hon. Friend has already been in touch with my right hon. Friend the Secretary of State for Employment. I do not think that there is anything that I can say to my hon. Friend which would go in any sense beyond what he has already been told.

Mr. Douglas Jay: When will the Government publish the usual annual White Paper on defence and disarmament? Should it not come before the debate, as it normally does?

Mr. Biffen: No, I cannot say precisely when the defence White Paper will be published. I would hope and expect to have the debate on disarmament ahead of that publication.

Mr. Stephen Ross: In view of the almost unanimous discontent with the Heather and Grass Burning Regulations in Committee this morning, will the Leader of the House assure us that there will be a further chance to debate that on the Floor of the House?

Mr. Biffen: I gather that there was a lively debate. I will look at that suggestion and be in touch with the hon. Gentleman.

Mr. Gary Waller: Now that the city of Bradford metropolitan council has abandoned the charade of being a nuclear-free zone, thus showing that the pendulum is starting to swing back towards a sense of realism, does my right hon. Friend agree that that strengthens the case for an early debate on defence and disarmament, when this new approach can be made more widely known?

Mr. Biffen: Yes, I most certainly do.

Mr. Greville Janner: As the Select Committee has now reported and made recommendations about the increase of deposits for general elections, may we have a swift statement on what action the Government propose to take on the matter? In view of the exchanges on rates this morning, may we have a very swift debate on the entire question so that councils such as Leicester, which have been attacked but which are energetic, excellent and Labour-controlled, can be helped to maintain their services while keeping rates down, in spite of the Government's reductions in central help?

Mr. Biffen: I have read the Financial Times today, which points out the beleaguered state of the Labour majority in the Leicester city council and I appreciate the robust defence which the hon. and learned Gentleman has


proffered. I shall draw the attention of my right hon. Friend the Home Secretary to his point about the important suggestions concerning the parliamentary deposit, but I am sure that the hon. and learned Gentleman will be the first to admit that that is a matter of considerable constitutional significance which is of interest in all parts of the House.

Several Hon. Members: rose—

Mr. Speaker: Order. I intend to call the six hon. Members who have been standing, then return to the Front Bench.

Mr. Stanley Cohen: Will the Leader of the House reply to the question by my right hon. Friend the Leader of the Opposition about the possible closure, and the Government's attitude towards the closure, of the steelworks at Ravenscraig? What will the effect be on employment, and what will be the economic and social consequences?

Mr. Biffen: The hon. Gentleman raises a significant point. I understand that no firm proposals about the Ravenscraig deal are yet with my right hon. Friend. More generally, I have said that there is a commitment to make a statement on the steel industry in the context of the corporate review.

Mr. David Winnick: In view of the constant pressure, innuendos and smears used by Ministers against opponents such as those in the CND, when will we have a statement from the Government stating that such KGB tactics of intimidation will cease?

Mr. Biffen: I am not quite clear why it is thought to be a slur to point out that somebody is an open and acknowledged supporter of the Labour party. Doubtless when we come to the more general debates about nuclear weapons, those will be the sort of issues which can be discussed.

Mr. Robert Parry: The Leader of the House will have seen early-day motion 448, which is now supported by 83 hon. Members, concerning the further application for the building of a new Falmouth container terminal. Will he ask the Secretary of State for Transport to make an early and clear statement to the effect that that application will not receive Government support, bearing in mind the strong feelings and concern of all dock workers in all ports which are already in over-capacity?
[That this House opposes the proposal of the promoting company to submit a further application under section 9 of the Harbours Act before the end of April to build a new container terminal in Falmouth; notes that the Falmouth community is opposed to this proposed development, as are communities with existing port facilities, and that the United Kingdom is already over provided with port facilities; and calls upon the Secretary of State for Transport to refuse this application having regard to the strong representations he has received from the Liverpool, dock workers' representatives and those from other port areas.]

Mr. Biffen: I recognise the topicality of that matter on Merseyside and I shall pass the hon. Gentleman's request to my right hon. Friend the Secretary of State for Transport.

Mr. Bob Cryer: Pending the debate on defence and disarmament, will the Secretary of State for

Defence make a statement to the House expressing the view that he supports the right hon. Member for Chelmsford (Mr. St. John-Stevas) that members of the Catholic Church—and of any other Church—have the right to speak out on the issue of peace and the preservation of life and against nuclear weapons? Will he at the same time explain that the Government have not attempted, and that no member or friend of the Government has attempted, to use any element of intimidation against the Catholic Church in order to produce Cardinal Hume's statement? Will he also confirm that the Duke of Edinburgh will not be wheeled out as an ally of the Tory party by supporting Tory party policy?

Mr. Biffen: I do not think it is necessary to observe that neither my right hon. Friend the Secretary of State for Defence nor any other member of this Administration would presume to instruct the Roman Catholic Church on these matters, and it does not put the debate on the appropriate level to suggest otherwise.

Mr. Dennis Skinner: Does the Leader of the House recall that a few weeks ago his hon. Friend the Member for Plymouth, Sutton (Mr. Clark) mentioned the £2,000 cheques that had been handed by mistake to my hon. Friend the Member for Edinburgh, Leith (Mr. Brown) instead of the SDP Member for Hackney, South and Shoreditch (Mr. Brown)? Does he recall that he acknowledged that appropriate inquiries would be made into that with regard to the Register of Members' Interests, remembering that all hon. Members are expected —although it is not demanded of them—to register their various interests? The handing about of cheques worth £2,000 is an important matter. As the SDP claims to be formed of people of purity and integrity, one would have expected those cheques to be put before that Committee. Has the right hon. Gentleman received any information from the Select Committee — or from its clerk, in response to inquiries—and will he report to the House so that we may all be assured that such cheques and many others that might be knocking around for the election are entered in the appropriate register?

Mr. Biffen: I shall look again at the problem to see if any constructive action might be taken.

Mr. Ioan Evans: Is the Leader of the House aware that there is a great deal of unease in the country about the Government's campaign against CND, not just because of the treatment of Monsignor Bruce Kent, who is a highly respected Roman Catholic priest but because earlier this week we had the fiasco of the Government's attitude to the Citizens Advice Bureaux which, it is said, was triggered off because Mrs. Joan Ruddock, the chairman, is a part-time employee of the CAB? Do not the Government need to make a statement to reassure the public that they are not indulging in tactics which, as I say, are causing deep concern?

Mr. Biffen: It is a well-known propaganda ploy to make a crude ludicrous assertion and then hope to manoeuvre opponents into denying it. The supposition that anyone in this Government has been trying to exert influence on the Roman Catholic Church and on Monsignor Bruce Kent is total nonsense and debilitates the level of argument.

Mr. Roy Hattersley: The Leader of the House will be aware that Government


amendments set down for Report stage of the Police and Criminal Evidence Bill would change the controversial clauses 9 and 10 out of all recognition. Were those amendments carried, those clauses would be quite different from those which we debated in Committee. Will he consider what I regard as a proper procedure—that of moving a motion which would remit those two clauses to a further Committee stage—so that they may receive proper consideration? I would do my best to assure the right hon. Gentleman that if he followed that practice we would make certain that the Government did not lose any time by making such proper consideration possible for the House.

Mr. Biffen: I am sure that the right hon. Gentleman will appreciate that perhaps this is not the most comfortable position in which to be engaging in such detailed discussion, but yes, I shall look at that suggestion.

Advanced Information Technology

The Secretary of State for Industry (Mr. Patrick Jenkin): The Alvey committee was set up last year at the request of the information technology industry to investigate the scope for a collaborative research programme in advanced information technology, sometimes, not wholly accurately, called fifth generation computers. That was done in the light of mounting concern in the industry at the increasing threat of overseas competition. I am most grateful to the committee for its extremely valuable report. After detailed consultations with industry I am now able to announce the Government's response.
The future competitiveness of our IT industry is a subject to which we attach the utmost importance. The report outlines the key enabling technologies in which the IT industry must maintain and strengthen its competitive position in world markets. Its theme is the need for collaboration between industry, academic institutions and other research organisations in order fully to mobilise our potential in those technologies. The task is beyond the resources of any single enterprise. The central purpose is to pave the way for IT products, IT processes and IT services that can be sold in the market in competition with the rest of the world.
We therefore accept Alvey's recommendation to establish a programme of collaborative research concentrated on the four main areas of technology set out in the report. Those areas are software engineering, very large-scale integration—advanced chips—man-machine interfaces and intelligent knowledge-based systems. Industy has realised the need for collaborative research in those areas, and it is ready to take part in such a programme. This positive involvement of industry in the funding, management and execution of the programme is crucial to its success, if we are to turn successful research into marketable products.
The key feature of the programme will be this collaboration between companies, Government research establishments and academic institutions. Work carried out in academic institutions will, as usual, be funded 100 per cent. by the Government. In the case of work carried out in industry, Alvey recommended that most of this should be 50 per cent. Government funded, but that some projects should attract 90 per cent. funding. We have considered this last recommendation closely, but have decided that 90 per cent. Government funding does not secure a sufficient industrial commitment and could lead to the programme becoming divorced from industry's needs. I have therefore decided that all industrial work should be 50 per cent. Government funded.
Companies taking part will be required to release know-how and to share results with their project partners. They will also be expected to license results on reasonable conditions to others in the programme, and to organisations outside the programme where this is needed to secure exploitation.
The report estimated that the research would cost about £350 million over five years. The Government stand ready to support a programme of research on this scale. However, the extent of the Government's contribution depends upon industry making its contribution and upon the programme's technical progress.

Mr. Tam Dalyell: Window dressing.

Mr. Jenkin: The report proposed that academic institutions should carry out some £50 million of research over five years, and industry the remaining £300 million. The full cost of this to the Government would be around £200 million. This money will be provided by the Department of Industry, the Department of Education and Science and the Ministry of Defence and, over the PES period, will not add to existing allocations. The Department of Education and Science will fund research through the Science and Engineering Research Council, mainly in the universities. The Ministry of Defence will fund research of particular importance to the future of our defence industry. The Department of Industry will provide the major portion of the Government's funds and will carry overall responsibility for the management of the programme.
A new, small, directorate will be established in the Department of Industry to co-ordinate the programme. It will be headed by Mr. Brian Oakley, currently secretary of the Science and Engineering Research Council. It will be staffed by people from industry and supported by the Government Departments concerned and the SERC. The directorate will report to a small supervising board of industrialists. Sir Robert Telford, who has substantial experience of the electronics industry, has agreed to serve on a part-time basis as chairman of the board.
This is the first time in our history that we shall be embarking on a collaborative research project on anything like this scale. Industry, academic researchers and the Government will be coming together to achieve major advances in technology that none could achieve on their own. The involvement of industry will ensure that the results as they emerge are fully exploited here in Britain to the advantage of our economy. Information technology is one of the most important industries of the future and therefore one upon which hundreds of thousands of jobs in the future will depend. Collaboration will ensure that the results of the research are widely disseminated, particularly to smaller firms, which have such an important contribution to make to the industry. No one can guarantee success, but the Government are convinced that this programme will ensure for British industry secure access to the new technology and the products and processes on which our future prosperity depends.

Mr. John Garrett: We thank the Minister for his statement, which in general we welcome. We agree with him that the programme set out in the Alvey report is crucial to the development of information technology in this country. Alvey repeatedly drew attention to the urgency of the matter and said that the programme should be under way by April 1983. It is unfortunate that it has taken the Government eight crucial months to respond to this important report.
As Alvey said, what alerted the Government to the issue was Japanese interest in British research. It said that British universities were in the lead in these technologies, but we could capitalise on the lead only by public enterprise because the private sector would not take the risks. If there were no public initiative, we would lie behind Japan, the United States and Europe in commerical exploitation. I am glad that the Government recognised the fundamental point that we have repeatedly stressed about the crucial role of public funding and direction in new technologies.
Does the right hon. Gentleman agree that the refusal to meet the Alvey proposal for 90 per cent. Government funding of some projects means that many small companies will not be able to join the programme, yet that is an area in which much innovation can come from small companies, as we all know? Furthermore, Alvey proposed 90 per cent. funding specifically to assist the dissemination of key technologies. It was specific about the areas in which it wanted 90 per cent. funding. Will the spread of new systems be hindered by the penny-pinching restriction of funding to 50 per cent?
The Minister touched only briefly on the implications for education, which are great. Alvey said, as we have stressed, that it is
no good just providing schools with microcomputers".
Alvey called for a massive expansion of teacher training and drew attention to the need now for 500 new trained personnel, 150 new academic posts and 800 new undergraduate places—in effect, a replacement of one quarter of the cuts in higher and university education last year. Is the Minister assured of the will and understanding of the Department of Education and Science in this expansion of higher education staffing? As we know, the Government propose further cuts in university staffing this year.
What is the Government's policy on the multinationals? Alvey said that they should participate in the programme only
where it is guaranteed that valuable technical information will not leak abroad.
What safeguard does the Minister propose'? It is a startling omission that he did not refer to this matter when we know that multinationals are snooping round this public money and wanting to siphon the knowledge that we have in this country back to their countries of origin.
In spite of all the publicity from the Department of Industry — we have all been showered with press releases from the Department—we have a serious trade deficit in information technology, which Alvey and Neddy believe will be no less than £1 billion by 1990 on present trends. What is the time scale to get this massive and important programme under way? We must be running at least a year late now, and time is essential if we are to hold our own, particularly with the Japanese.

Mr. Jenkin: I am grateful for the hon. Gentleman's welcome to the decision, which is one of the most important scientific announcements that has been made in the House for many years.
The hon. Gentleman complained about the delay. He should understand that this represents a novel system of advancing high technology research. We have done a great deal of research in this country over the years, much of which has never been pulled through to the market. We all acknowledge that. The key part of the programme involves wholehearted collaboration with industry — industry funding, industry helping to operate and, of course, industry providing all the funds for the ultimate exploitation of the results in the market. We therefore had to consult hundreds of companies which may be involved and have an interest in the programme. Of course, that took time. I do not apologise for taking that time because it was important to get the issue right.
The hon. Gentleman asked about the decision not to accept the Alvey figure of 90 per cent. I assure him that we are in no sense being penny-pinching or trying to save expenditure. The Government's commitment will


approach 60 per cent. of the total amount involved. Moreover, we wished to ensure that the companies carrying out such research would have sufficient direct interest to make sure that it always remained relevant to the market.
The hon. Gentleman questioned whether small companies would be interested. Small companies are coining forward in large numbers to share in the Community's Esprit programme, where the sharing is on the same fifty-fifty basis. So there are good grounds for assuming that they will wish to do so here.
The hon. Gentleman asked whether we would have the necessary manpower and whether my right hon. Friend the Secretary of State for Education and Science had recognised that need. We have made provision for this. The programme provides for the training of the necessary skills and is designed to go hand-in-hand with the IT new blood initiative which my right hon. Friend has already announced to the House. It will also ensure that the people whom we already have are used for the benefit of the United Kingdom and do not— as, incresingly, in the past—go to work for our competitors.
The hon. Gentleman asked about multinationals. All companies taking part in the programme will be required to meet the same general conditions. They must have research expertise to contribute. They must be ready to collaborate and to accept the rules on intellectual property rights. They must exploit technology arising from the programme within the United Kingdom. Organisations that can meet those conditions will be eligible to put forward proposals to take part. We shall, however, require clear and categorical assurances that work done here does not leak overseas to benefit Britain's competitors.
I believe that the programme will be of enormous advantage to our information technology industry. My hon. Friend the Minister for Industry and Information Technology deserves immense credit for the great efforts that he has made over the past two years to advance the interests of the information technology industry.

Mr. Barry Henderson: My right hon. Friend's statement is welcome, but does he accept that, with a substantial programme such as this, there is always a danger of preference being given to organisations within the London commuter belt and to very large firms with loud voices? Will my right hon. Friend make sure that the benefits of the scheme are spread throughout the country, and that particular attention is paid to the small firms which will be good at innovation? I am sure that if that is done the results of the programme will improve.

Mr. Jenkin: I am grateful to my hon. Friend for what he said. I assure him that it is our intention that universities, other centres of research and large and small firms throughout the country will have the opportunity to collaborate in the programme, if they can meet the requirements. A university such as Stirling, which has a high reputation in this area, will clearly have a part to play. We are determined that all who can help to forward the work will have an opportunity to take part in it.

Mr. David Penhaligon: Why does the Secretary of State believe that industry will see the offer of 50 per cent. of the costs as a bargain, when the condition of that contribution is collaboration leading to a wide

dissemination of information? Will not the risks involved deter the companies from taking up 50 per cent. of the cost?

Mr. Jenkin: I disagree with the hon. Gentleman. Combining collaboration in the laboratory with competition in the market is something that, in the past, other countries have done better than we have. This is an opportunity for us to show that we can do it as well. As one industrialist said to me the other day, anyone who is not prepared to put up 50 per cent. of the cost of the research cannot have much faith in the programme.

Mr. Tam Dalyell: In answer to my hon. Friend the Member for Norwich, South (Mr. Garrett) the Secretary of State said that his decision on the 90 per cent. was not intended to save expenditure. Will he be fair to the Alvey committee? It gave a range between 90 per cent. and 50 per cent. in paragraph 8.4 of the summary of recommendations, depending upon the particular activity. Surely this should be a matter for discretion, as Alvey argues, not for a straitjacket. The answer to my hon. Friend the Member for Norwich, South should surely be that the Government will allow some degree of discretion.
Will there be help for computer-aided design? The Minister for Industry and Information Technology is nodding, so I assume that the answer is yes.

Mr. Jenkin: I acknowledge that the hon. Gentleman knows a great deal about these matters. We gave careful thought to what the Alvey committee recommended. The hon. Gentleman will surely acknowledge that too often in our scientific and technological history the Government have funded laboratory research to a very large extent—sometimes 100 per cent. — and that such research has never seen the light of day in the market place and so has never benefited our economy. How far we should go is a question of judgment. Our normal limit is 33⅓ per cent. I hope that the hon. Gentleman heard Mr. David Fairbairn of the National Computer Agency say this morning that the argument is between 33⅓ per cent. and 50 per cent., and that if the Government came up with 50 per cent. he, for one, would be well satisfied.

Mr. Patrick McNair-Wilson: I congratulate my right hon. Friend on his statement and on his positive response to the report, which will be widely welcomed. However, he should now have urgent discussions with the Chancellor of the Exchequer about the rules governing import duties. Currently, substantially less tax is paid on made-up machines than on individual chips. Those rules need revising in the interests of British manufacturers.

Mr. Jenkin: That point has also been made by a number of firms in the market. As my hon. Friend will realise, import duties are a matter for the Commission, but we are considering the question extremely carefully, and if we think it right to do so we shall make representations to the Commission in the usual way.

Mr. John Grant: Does not the Secretary of State's statement show a surprising degree of complacency, in view of the Government's loudly proclaimed commitment to the sunrise industries? Does he think that by short-changing industry in the way that he has described, instead of following the Alvey proposals, he will be enabled to compete adequately with the


programmes of the Japanese, the French, the West Germans and the Americans, with their huge Government backing?

Mr. Jenkin: I am astonished at the hyperbole of the hon. Gentleman's question. To describe as short-changing industry the programme I have announced, under which the Government will pay nearly 60 per cent. of a £350 million research programme, is an abuse of language.

Mr. Kenneth Warren: I welcome my right hon. Friend's statement, but I suggest that the problem lies less in research and development, in which we are at least 10 years ahead of what the Japanese are trying to get from us, than in marketing. Will the Government, therefore, consider accepting proposals on the marketing of end products rather than just giving all the opportunities to research and development? Is it not possible for the Government to sponsor ideas as to what should be marketed, bearing in mind that the Government are the largest single purchaser of information technology and that the Ministry of Defence, with 10,000 microprocessors on order, could at least supply us with common interfaces for hardware and software?

Mr. Jenkin: I am aware of my hon. Friend's expertise in such matters. However, he will know that the Alvey report was largely produced by people in the industry and represents what they thought necessary. They recognise that in the area of what in my statement I called enabling technology we cannot yet have an effective place at the table in international collaboration. However, we are determined to see that the research results in marketable products for the benefit not only of this country but of the industry in this country. That is why I laid such stress on the importance of industrial collaboration. This is what industry has wanted—in essence, if not in every detail —and I believe that we are setting about it in the right way.

Mr. Geoffrey Robinson: Does the Secretary of State accept that there is a wide welcome on the Labour Benches for the views of the Alvey committee, on which there were several fully paid-up members of the Labour party? Does he further accept that in deviating from that committee's recommendations he has simply watered down the policy that we would have approved? That is well known to the Minister of State, who served on a board with one of the members of the committee. The Secretary of State should inform himself.
Will the right hon. Gentleman confirm that even now we are still spending far less than our major competitors? Will he take great care that companies already heavily committed and supported in defence research do not benefit disproportionately from this further funding? Will he also ensure that the directorate has sufficient powers to cut corners and push measures through the bureaucratic machine in Whitehall to make sure that something comes out of the programme and reaches the market?

Mr. Jenkin: The hon. Gentleman mentioned bureaucracy. That is why we have gone for a much simpler structure than that recommended by the Alvey committee. In addition to Mr. Brian Oakley, we envisage perhaps four directors—one for each of the key enabling technologies —with industrialists being seconded to do some of the leg work. I entirely endorse what the hon. Gentleman says about the need, perhaps not to cut corners, but certainly

to move swiftly. As it is a five-year programme, we must start quickly. I hope that the directorate will be in position within a couple of months and that the first contracts can be put out before the end of the summer.
I hope that the hon. Gentleman will not try to make political points about the membership of the committee. We chose good people. If some of them happened to hold misguided political views, that is nothing to do with me.

Viscount Cranborne: Does my right hon. Friend agree that the general welcome for the proposals among Conservative Members is noteworthy for their acceptance of a proper Government role in economic investment? Has any substantial financial commitment to the programme been made by private industry in terms of the 50 per cent. that it is expected to contribute?

Mr. Jenkin: We have had clear assurances from a large number of firms that they are ready and eager to put up their share of the funding for a programme that they recognise to be essential if we are to keep up with the field in this important area. There are no specific commitments yet, because until the directorate gets under way there are no specific projects to which firms could subscribe, but I am certain that we shall have no difficulty at all in finding the industrial commitment. If industry puts up its money, the Government will do the same.

Mr. Sydney Bidwell: Has the right hon. Gentleman heard of the plan to close the department of building technology of Brunel university? Will his announcement save that department?

Mr. Jenkin: I rather doubt it, somehow, but I shall certainly draw the matter to the attention of my right hon. Friend the Secretary of State for Education and Science.

Mr. Richard Page: I thank my right hon. Friend for his statement. Is there not the usual danger that the ivory tower attitude of the academics will prevail? When projects are considered, will the views of the industrialists be taken into account and indeed have priority, as it is they who will provide the jobs and the employment prospects in the future?

Mr. Jenkin: My hon. Friend's last point is absolutely right. There will be substantial industrial involvement. Industry will contribute money and people and will play a major role in the management of the programme. The programme will not remain in an ivory tower. We must ensure that the results of the research come out of the backroom and into the showroom and result in products, processes and systems that will be marketed throughout the world.

Mr. Bob Cryer: After four years of free enterprise, the market philosophy and industrialists standing on their own feet, is it not an admission of failure for the Government now to have to intervene in this way to provide collaborative projects between firms and to recognise the importance of co-operation rather than competition?
Will the Minister tell us more about the supervising board of industrialists? Will its members have financial interests in the industry or will they be independent?
What policing methods do the Government envisage to ensure that multinational companies with important assets in a wide range of countries cannot obtain Government money and then move the ideas from the United Kingdom to wherever they choose? Does not the best means of


achieving that lie in public ownership of the ideas and the licensing of users who wish to take advantage of them? Is that not the only sure way to police the use of taxpayers' money and the results achieved?

Mr. Jenkin: If the hon. Gentleman still believes that that is the solution to our industrial difficulties, heaven help him. Public ownership by itself has involved huge, enormous, massive expenditure of public money and in many cases, as the "Horizon" programme showed, has produced absolutely nothing for the market—no jobs, no exports and no added value for this country. The hon. Gentleman's view is utterly wrong. We have never taken a dogmatic view on this. We have always made it clear that there is a role for Government. When the leader of the high-level German industrial delegation that has been here for the past couple of days was asked by the press in which area of British achievement there were lessons for Germany, he said that it was the way in which the British managed research in advanced technology. It is a mixture, a collaboration, a partnership between the public and private sectors and I will defend it until my dying day.

Mr. Gary Waller: I congratulate my right hon. Friend, not only on the farsighted approach in his statement but on the firm way in which he dealt with the suggestion made by the hon. Member for Keighley (Mr. Cryer). Both will be greatly welcomed by everyone in the industry.
Although few members of the British population will have heard of fifth generation computers, let alone understand much about them, does my right hon. Friend agree that in the longer term there is probably unlimited scope in this area? Does he agree that user friendliness and expert systems mean that fifth generation computer systems will probably be available directly to the great majority of British people, providing enormous scope for industry to develop the talents available in this country for the future?

Mr. Dennis Skinner: The hon. Member is scared of my hon. Friend the Member for Keighley (Mr. Cryer).

Mr. Jenkin: Electors in the constituency to be contested by my hon. Friend the Member for Brighouse and Spenborough (Mr. Waller) and the hon. Member for

Keighley (Mr. Cryer) will no doubt get to know a great deal about these matters. I am sure that they will have no difficulty in choosing the candidate for whom they should vote.
I assure my hon. Friend that in what we rather chillingly describe as the man-machine interface the user friendliness of the equipment is extremely important if we are to make the most of these great advances in technology.

Mr. Barry Sheerman: The Secretary of State says that he is not dogmatic, but British universities have suffered four years of dogmatism from people such as his colleague the Secretary of State for Education and Science. The university sector, especially the research element, has been driven into virtual hibernation and many of its most able and highly qualified people have been driven out. Is it not about time that we heard some positive comments from Ministers about the way in which the universities have led in this area of research while private industry has lagged behind and failed to take up the developments in which the universities have led the way? Will universities such as Bradford and Salford, which have been so cruelly used by the Government, receive some of the funds announced by the right hon. Gentleman to expand their programmes?

Mr. Jenkin: The hon. Gentleman would do well to read the statement made by my right hon. Friend the Secretary of State for Education and Science when he met a delegation from the Association of University Teachers the other day. He spelled out the enormous amount that the Government have done for the universities since we came to office.
I do not think that it is helpful to apportion blame because we have not always been able to exploit in the market place the results of the research that we have done. I am sure that the hon. Gentleman would acknowledge that there has developed in the universities in this country a most unfortunate ethos that somehow to make money out of their work is wrong.

Mr. Dalyell: Oh, no—10 years ago.

Mr. Jenkin: Happily, that is changing, and changing rapidly, and not before time. What we want to see is something of that spirit of entrepreneurship which can be seen in so many American universities, where discoveries in the university laboratory which have a commercial potential are swiftly exploited in the market, to the benefit of the individual, the local community and the country.

Cruise Missiles

Dr. David Owen: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the need for an urgent debate on the desirability of a dual key control mechanism for cruise missiles".
You have heard already, Mr. Speaker, in the discussions today anxiety expressed at the absence of a debate on defence and disarmament, and you will know that this discussion has been going on at Business Questions ever since December. It is not just the right hon. Member for Down, South (Mr. Powell) who has alleged that there is an inability to bring this forward. Anxiety has been expressed on the Conservative Benches that there will not be an opportunity for a specific debate on a motion relating to the control of cruise missiles.
The matter is urgent in another respect. It has been openly stated by the Prime Minister that she will consider whether to hold a general election after she has had four years in office. It is now openly suggested that an election might well be announced on 9 May. My submission to you, Mr. Speaker, is that if that were the case this House would not have an opportunity of discussing this most urgent issue, particularly in view of the fact that the Prime Minister is due, we are told, to discuss this at the Williamsburg summit. It is also widely alleged at the moment that the British Government, in the past few weeks, have entered into detailed discussions with the United States Administration about a dual key mechanism.
I do not think that I have to prove to you, Mr. Speaker, the importance of this matter, but there is a specific matter that I feel I must bring to the attention of the House, because I do not believe that this issue should be discussed in the newspapers first. It should be presented to Members of this House so that they can make their own evaluation of its importance and of the need for an urgent debate.
The Prime Minister has now confirmed to me details of a serious incident involving four missiles in 1962, which was not reported at the time to the Government of the day and has only recently come to light. It has, I believe, direct relevance to the debate in the House about the control of cruise missiles were they to be deployed in this country. It demonstrates that it is not sufficient to have confidence in the joint decision-making of a President and a Prime Minister. It is also necessary for this House to have confidence in the actual launch control mechanism for missiles based in this country—a point that was well understood by the then Prime Minister, Mr. Harold Macmillan, when he insisted on dual control.
In 1962 an RAF technician discovered during routine servicing of an inert missile that a British key turned the United States air force lock. A comprehensive check of the other missiles revealed that this was also the case for one other USAF lock. All the locks were immediately changed as a result.
What is more important, of course, in relation to what would be discussed in this House were you to feel it necessary, Mr. Speaker, to have a debate, is that the engagement of the keys was only one element in a complex missile-launching procedure, in the early stages of which it was necessary for an RAF technician, located on the

actual launch site some 150 to 200 yards from the trailer, manually to operate valves and switches to allow the automatic launch sequence to supply the missile with fuel, liquid oxygen and electrical and hydraulic power. British control was therefore guaranteed at all times and at no time, fortunately, although the United States and United Kingdom keys were interchangeable, could one person gain control of the system.
Not only did the launch countdown require the use of both keys to complete the launch sequence, but the United Kingdom key that had begun the process of activating the missile had to remain in place as the United States key was inserted some minutes later to begin the activation of the warhead. Further, the key holders—the United States authentication officer and the RAF launch control officer —were never alone in the control trailer when a live missile was on standby. The standard complement in the trailer was five—four from the RAF and one from the USAF.
That was a serious incident. It is my submission to you, Mr. Speaker, that the House should be able to debate it. The danger of the continued postponement of this debate and the inability to bring a motion to the Floor of the House for the collective judgment and wisdom of the House of Commons—particularly if we are to have an election meanwhile—demands that this debate be given urgent priority over business.

Mr. Speaker: The right hon. Member for Plymouth, Devonport (Dr. Owen) gave me notice before 12 noon today that he would ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the need for an urgent debate on the desirability of a dual key control mechanism for cruise missiles.

Mr. Dennis Skinner: And dual leadership.

Mr. Speaker: Order. The hon. Member for Bolsover (Mr. Skinner) will remain quiet while I am speaking.
The right hon. Gentleman has drawn our attention to a very serious matter, which the House will take seriously. I listened very carefully to what the right hon. Gentleman said. The House knows that under Standing Order No. 10 I am directed to take into account the several factors set out in the Order, but to give no reasons for my decision.
Despite the importance of what the right hon. Gentleman has said, I must rule that his submission does not fall within the provisions of the Standing Order, and therefore I cannot submit his application to the House.

BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 16 MAY

Members successful in the ballot were:

Mr. Charles R. Morris
Ms. Harriet Harman
Mr. Peter Snape

BILL PRESENTED

IMPORTATION OF MILK BILL

Mr. Peter Walker, supported by Mr. Secretary Whitelaw, Mr. Secretary Pym, Mr. Secretary Prior, Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Secretary Fowler, Mr. Alick Buchanan-Smith, Mr. Peter Rees and Mrs. Peggy Fenner, presented a Bill to make provision as to the importation of milk and as to imported milk and milk brought to Northern Ireland from Great Britain: And the same was read the First time; and ordered to be read a Second time upon Friday 29 April and to be printed. [Bill 142.]

Orders of the Day — Finance Bill

(Clauses 12, 16, 63, 73 and 88; Schedule 11; new Clauses relating to the national insurance surcharge or the rate of value added tax first appearing on the Order Paper not later than 19th April.)

Considered in Committee. [Progress 27 April.]

[MR. BERNARD WEATHERILL in the Chair]

New clause 2

REPEAL OF THE NATIONAL INSURANCE SURCHARGE ACT 1976

The National Insurance Surcharge Act of 1976 is hereby repealed.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

Mr. Robert Sheldon: I beg to move, That the clause be now read a Second time.

The Chairman of Ways and Means (Mr. Bernard Weatherill): With this it will be convenient to take new clause 4—Abolition of national insurance surcharge:
The National Insurance Surcharge Act 1976 shall be repealed with effect from 1st August 1983.

Mr. Sheldon: Under clause 88, the national insurance surcharge is reduced to 1 per cent. We want to go rather further than that and, because of the rules of the House, we have had to put this down in the form of a new clause. The new clause repeals the whole of the Act, straightforwardly and without equivocation. I believe that this is the way to proceed because of the extreme position of British industry at the present time.
I have often expressed my opposition to the national insurance surcharge. It is a tax on exports, but not on imports, and as such is the reverse of VAT. It increases the cost of employment, and at a time when employment prospects have been severely jeopardised that is more important than ever. In a number of other ways it is worse than VAT as it increases the prices charged for goods and services, including even those that are zero-rated for VAT purposes. Although VAT exempts food, books, newspapers and many other articles, the national insurance surcharge works its way into the increased prices for those commodities.
I have always accepted that, but with our economy now in a critical state any help that we can give industry should be given. The first priority must be to remove this tax now that unemployment has risen so rapidly and unfortunately to its present level.
In the past four years, with the advent of the Government, North sea oil has arrived to help our revenues and balance of payments. Among the consequences of the increased revenues from North sea oil we might have expected an increase in investment. Some people rightly looked to the re-equipment of industry and others to the revitalisation of our towns and cities. The national insurance surcharge is of enormous importance because it offers us the only real opportunity in the Finance Bill to give assistance and support to industry in its present difficulties.
The reality has been much more disappointing. One of the saddest features of the last four years is that we have been barren of economic success. In many of our centres of population, there are now more signs of crumbling and decay than anything we would have accepted or tolerated not many years ago. Our minor roads weave their way around the country and produce more alternative routes than almost any other country. They used to be maintained in a state of near perfection, but we are unlikely to see that again. Our motorways, with their perpetual repairs and lane closures, are seen as a national joke, and by some as a national disgrace.
Our railway journeys, in an age of great technical developments, take longer each year. The increase in journey time is chronicled in the annual railway timetable, which records our failure not so much to advance the system as to retain the basic maintenance of an investment introduced by those who felt a greater responsibility than those who have come after them. All these things could have been tackled by giving more resources to industry through the increased public expenditure and help proposed in the new clause.
The picture of decay and disrepair is the same on our council estates. Paint is allowed to peel off, exposing the woodwork to the weather, doors are rotting and window frames decaying. On many occasions I, and I am sure many other hon. Members, have discovered that such window frames are ready to fall out, so bad has been the maintenance. Our roads and pavements show the same dilapidation and our streets are closed due to collapsed sewers. The most basic maintenance tasks are neglected, roads are potholed as never before, and anyone with respect for his motor car plans a route that will do least damage to its springs and suspension.
Our industries show many of the same signs. Factories stand empty, with estate agents' signs on their gates. Parts of our industrial estates have an uneasy silence unfamiliar to those who knew them only a few years ago. The absence of smoke from many chimneys owes nothing to the Clean Air Act.
When we look for statistical confirmation of those impressions, the evidence is all too clearly at hand. In the first year after the arrival of the Government, manufacturing output fell by 10 per cent. By 1981, it had fallen by 14 per cent., and the current level is around 15 per cent. Output in the textile industry fell by 16 per cent. in 1980. The figure had reached 24 per cent. in 1981, and it is now 30 per cent. below its level when the Government took on their responsibilities. Output in the metal manufacturing industries is down 28 per cent., which explains the devastation brought to the west midlands by the Government's policies.
4.45 pm
Company liquidations are an all-time record and would be much worse but for the fact that the banks, with the large profits created for them by the Government's high interest rates, have hesitated to close down firms whose flimsy balance sheets would long ago have forced them into liquidation. In such circumstances, investment in manufacturing industry has collapsed. By the end of 1982, we were investing 26 per cent. less than four years ago, and even that miserable total has been achieved only because commercial and financial companies that are still making profits, in order to reduce their tax liability, have

leased assets to industry and so made use of the capital allowances that the profitless manufacturing sector has been unable to use.
In fact, with more than £30 billion of unused capital allowances, many manufacturing companies have no investment incentive whatever from the tax system—a wholly new situation. In these circumstances, leased assets have increased and the present low level of investment would be much worse without them.
As a direct consequence of their economic policies, the Government have seen a desolation of industry without parallel in the western world. Faced with this wholly exceptional situation, the alarm bells should have been sounding all over Whitehall. Money, assistance and measures should have been provided immediately to rescue our greatest economic asset — the means of production and the means by which we earn our living.
Newly emerging oil revenues from the North sea should have been poured into the structural retention and development of our industrial companies. Public sector orders should have been provided, expedited or even diverted to them so that they could retain their capacity while planning their expansion and diversification. In the Government's lifetime, no priority was greater than that.
The Prime Minister is fond of looking at the lessons of Japan. The most important lesson I see is the relationship between Government and industry in that country. Can anyone visualise a collapse of industry in Japan with Government looking on, impassive and inert? Assistance should have taken the place of economic theory. Industry was a swimmer in the sea struggling for its very existence. At such a time we do not start worrying about the cost of the life belt—deliverance is all.
Our entire national effort should have been directed to the rescue of British industry. It is a giant failure of opportunity that the nation's resources, involving the whole of industry and our people, were not called upon to safeguard our basic wealth-creating processes. The Government's incomprehension of those important matters troubles us most.
The trouble is that we are a divided nation—divided between class and class, north and south, and Government and industry. Government failed to understand the industrial world, and this Government's failure is the worst. The Department of Industry is a burlesque of such a department as it exists in France, Italy or Japan. That would be bad enough, but the problem is aggravated by prominent industrialists who seem at times to indulge their preference for politics rather than profit, let alone industrial expansion. How else can one explain the reaction which greeted the director general of the CBI when, foreseeing the industrial devastation which was to lay waste so much of what he as an industrialist stood for, he called for a "bare knuckle fight" to halt the ruin that he anticipated?

Mr. D. N. Campbell-Savours: Will my right hon. Friend give way?

Mr. Sheldon: In a moment.

The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne): Why not give way now?

Mr. Sheldon: I shall give way shortly. Some of us always give way. I plead that I am one of those.
The forced withdrawal of what the director general of the CBI said put an end to one of the few hopeful attempts


to forestall the disaster that was to come. However, it showed the unprofessional nature of our industrial leaders who prove, time and again, that party politics are of greater interest to many of them than their role as custodians of our industry.

Mr. Campbell-Savours: Is my right hon. Friend aware that many observers of these matters, having studied the CBI's report in detail, began to wonder from where the CBI drew its conclusions? Is he further aware that anyone who examines that document will note that there are innumerable examples of deterioration rather than amelioration because the Government, in conjunction with the CBI, have misrepresented these matters to the British people? Is he also aware that the country will not be fooled at the next general election? Whatever the Government say which sounds positive, affirmative and supportive of what they have done, the people will recognise the truth, which is that matters are deteriorating each day.

Mr. Sheldon: I entirely agree with my hon. Friend. I am delighted that I gave way to him, as he has emphasised some of the crucial aspects of the issue.
I am saddened most by the Government"s failure to comprehend what is going on in British industry today. If the Economic Secretary to the Treasury went just a few miles north of his rural constituency to the centre of Manchester to see what is happening in the industries there and talk to the people, the Manchester chamber of commerce and others, he would get the same response as I get. When I ask them which Government produce the profit and output as opposed to what their politics are, the answer is always the same: they say that they do better under a Labour Government. Although their politics is Tory, their profits are Socialist. I have been accepted by many such people with whom I am happy to engage in discussions and debate.

The Chief Secretary to the Treasury (Mr. Leon Brittan): Will the right hon. Gentleman give way?

Mr. Sheldon: In a moment. [HON. MEMBERS: "Oh."] I am merely showing that the right hon. and learned Gentleman, who is alway so slow to give way, will never have that problem with me.

Mr. Brittan: I think that the right hon. Gentleman will find that the average interval which elapses between giving way is no greater than the time that has elapsed between his giving way to his hon. Friend the Member for Workington (Mr. Campbell-Savours) and me. If it is so clear to the captains of industry that they are better off under Labour, to what does he attribute their open support for the Conservative party? Does he attribute it to idealism, altruism or what?

Mr. Austin Mitchell: Or the peerage.

Mr. Sheldon: One of the sad aspects of the relationship between industry and the Conservative party is that the leaders of industry have too frequently looked to their future, their personal taxation, the class barrier and on which side they see themselves rather than to the success of their industry. They have contributed significantly to the divisions in society that I have mentioned.
The CBI is not represented by its economic experts, who are good, and we get a completely different picture from those who really represent industry. The statements

of the National Economic Development Office have been quite different from those of the CBI. In its report on 13 March which was based on the sector working parties, it said:
None of the committees which have reported foresees an increase in employment in its sector up to the end of the decade; continuing productivity improvements will be needed in order to maintain sectoral competitiveness, and many committees expect further reductions in employment to take place.
It is rare indeed for a body from industry to show such unanimity. It is right that we should consider what it says in the light of its membership. If we examine the membership of the sector working parties, one thing stands out. Their views reek of the factory and the producer which is so absent from the after-dinner political comments of those who claim to represent an industry but cannot justify that representation.
With regard to the electronic components sector working party, the comments that I have already referred to are supported by such people as the managing director of the solid state division of the Plessey Company Ltd., the managing director of Marconi Electronic Devices Ltd. and the managing director of Ferranti Electronics Ltd. In the gauge and tool sector working party, those views are supported by such people as the managing director of Novogage Ltd., and the managing director of Exel Mould and Tool Ltd. In the process plant sector working party, those views are supported by such people as the managing director of Orbit Valves Ltd., the managing director of Babcock Power Ltd. and a few trade unionists such as Mr. Perkins, the divisional organiser of the Amalgamated Union of Engineering Workers. Those people spend their days working and struggling to keep industry afloat. They do not tend to go to political functions organised by the CBI, which does not have the same connections with the industries that I have mentioned. I believe that the people to whom I have referred represent industry much better. Their views are at considerable variance with those expressed by some members of the CBI.
It is even more interesting to note that one sees something completely different in the CBI's figures as opposed to its comments. Few things better illustrate the gulf between Government and industry than the interview which Steve Vines conducted with the Secretary of State for Industry in The Observer on 20 March 1983. The Secretary of State had this to say about the Engineering Employers Federation:
They have been banging and banging away at us because we had to stop the small engineering firms investment scheme (SEFIS). Then they say there's nothing in this Budget for our industries, and here we are with £100 million over the next three years to revive SEFIS and I don't think they've even noticed. It's so damned unfair.
The report continued:
Patrick Jenkin, in other words, is not a happy man. He reckons this has been a marvellous Budget for business, but no one seems to notice.
Manufacturing industry has declined by 15 per cent. in the past four years. In other words, demand has been shorn by 15 per cent. That represents more than £10 billion a year, even without adding the normal growth that should have been expected in that time. Manufacturing industry has lost £10 billion a year in orders. The Secretary of State offers £30 million a year and is unhappy because he is not greeted as the great deliverer. Faced with the enormity of the damage to industry, he is not only quite unaware of what the Government have done; he even believes in the


remedial effects of the corn plasters that he brings out of the dusty first aid box to dress the gaping wounds that he is unable even to perceive.
So uncomprehending is the right hon. Gentleman that, when asked in that interview a question about control over enterprises, he is reported as follows:
'What the hell do they want' challenges Jenkin, 'They want the fun of being in a small business and they want someone else to take the risk.
The Secretary of State for Industry may consider it fun to run a small business under this Government. More than 20 years ago Harold Macmillan tried to convince those who scoured the world for orders, staying in a different hotel each night and living out of a suitcase, that exporting was fun, and he earned the scorn and derision of overseas salesmen. Bigger by far is the incomprehension of a departmental Minister of those whom he should be trying to encourage.
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The article ended with the comment by the author:
The suspicion lingers that the jobs boost will not be great".
Let it linger no longer. We know that unemployment will continue to rise, and we know the combined views of the Government, the public expenditure White Paper, the NEDO report, the CBI survey, the TUC economic review and countless others. Rather than the gloss put on the position in the CBI report, the figures in the survey show that 89 per cent. of firms report insufficient demand as against the 93 per cent. who were asked the same question in January. The figures also show that the firms expecting an increase in employment in their enterprises represent only one quarter of those who expect a decrease. Only 4 per cent. of companies that were asked whether their present stocks of finished goods are more than adequate, adequate, or less than adequate replied that their stocks were less than adequate.
The Chief Secretary was right to deny that there is a boom, because there has been hardly more than a hiccup and we cannot guarantee that even that will take place. Assistance must be given to industry. Although that is not the only measure that we wish, it will play an important part in recovery. In moving the new clause, we do not say that this is the only action that must be taken to assist industry. It is one of a number of policies that we hope to introduce to help to increase demand for its products, improve its manufacturing process and reduce its costs. It is an important new clause and I commend it to the House.

Mr. Richard Wainwright: New clause 4 tabled by alliance Members is identical in purpose to the new clause that has just been moved by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). It is always a pleasure to go in to bat on matters of industry and trade on a wicket prepared by the right hon. Gentleman. Today he has mown, rolled and watered the wicket so well that I shall speak more briefly than I had intended. His arguments were so sound that they confirmed my view that when eventually the grateful British public erect stained glass windows commemorating the golden age of the Lib-Lab pact the right hon. Gentleman will be one of the artist's chief themes, because he represents the respectable side of Socialism—I hope that my remarks do not cause him pain—and his knowledge of industrial matters far exceeds that of the Members on the almost empty Conservative Benches, and would exceed it even if those Benches were full.

Mr. Bruce-Gardyne: I was interested to hear what the hon. Gentleman said about the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) watering his wicket. The right hon. Gentleman and his hon. Friends watered his wicket, if that is the appropriate phrase, in 1976–77 by introducing the national msurance surcharge. Thereafter, during the Lib-Lab pact, the hon. Member for Colne Valley (Mr. Wainwright) and his hon. Friends voted for the enlargement of that tax. Now we are asked to believe that the logic of the Lib-Lab pact is that they always went together in opposite directions. Is that correct?

Mr. Wainwright: I hoped never to be in the Chamber when a Treasury Minister, forsooth, would expatiate in such a ponderously nonsensical way about something that he long ago exhausted of any small grains of truth that it might have had.
I mentioned the empty Conservative Benches, which prompts me to say that the Committee should be especially diligent in discussing the national insurance surcharge, simply because few of those who pay it can vote in a general election. The employers of the vast majority of British people are corporate bodies, and Conservative Members have refined the art of doing down bodies that have no vote. That is why they retained the rating system, despite all their promises to replace it, because most of those who pay commercial rates cannot vote. In its better moments, the House is careful about taxes that are paid by those who cannot be directly represented in the House.
Circumstances and the labour market have changed greatly since the national insurance surcharge was introduced. Part of the patchwork gospel of Conservative Members is that we should learn to adjust to market forces, and that successful business people have made that adjustment. In times of high or almost full employment there is something to be said for a payroll tax. Although I agree that full employment was already on the wane when the National Insurance Surcharge Act 1976 was introduced, Britain was not suffering from the tragic and deliberately induced high and increasing unemployment of today. It behoves the Committee to take note of the labour market. It is a pity that the Government did not note it much earlier, because this tax should have been abolished two years ago.
The right hon. Member for Ashton-under-Lyne has said, although not today, that it is high time that an adjustment was made in the Government's treatment of men and women in industry compared with their treatment of machinery. At one time skilled workers were desperately scarce and Governments were right to encourage industry rapidly to invest in labour-saving machinery. There is still a case for labour-saving machinery that improves the long-term competitiveness of a firm, but it is high time that the balance was redressed between the over-generous treatment of those who buy labour-saving plant and the absurd tax on jobs, which affects those who wish to engage men and women, especially for work requiring craftsmanship or skill. An employer who wishes to take on a young person from a district that he knows, or who wishes to improve the skill force in his company, is penalised by this tax.
The Treasury and Civil Service Select Committee did not mince its words when discussing this year's Budget. An eloquent passage that has been widely commented on in the press stated that sterling and costs are the key to the United Kingdom's economic success. It went on to say


that it hoped that the Chancellor would pay more attention in his Budget to the needs of business than to the clamant demands of the admittedly overtaxed individual. Panic struck the Government in the sphere of personal taxation. The Government did not heed that Committee's advice this year and decided instead on an over-indexation of the thresholds of income tax.
In the days before the CBI was suddenly seized with a short-sighted passion for entering party politics, it made the valid point, and I quote from the "CBI News" of 25 March 1983:
By levying an NIS, we are imposing a tariff on ourselves.
That is just what it is. This tax should not merely be reduced by instalments but the Act ought to be repealed so that no instrument is to hand for any future Government to revive the tax whilst unemployment is high.
When the CBI was in a healthier frame of mind than its president now allows it to be, it recommended to the Chancellor earlier in the year that the abolition of the NIS would improve competitiveness, reduce costs, boost profitability and encourage employment. To maintain a special tax on jobs that hindered exports and boosts imports, with unemployment at its present high level, was perverse.
The Government are maintaining a special tax on jobs, albeit at a reduced rate. The Government will do nothing that might be taken as a tacit admission that inflation will soon rise because they wish to disguise from the British public the fact that they do not leave behind any structural improvement whatever in the economy, but only the temporary effects of a deliberately induced depression. They have prescribed short-term drugs for the economy and when the effects of the drugs wear off the British public will find out that these years, and North sea oil, have been frittered away.
My hon. Friend the Member for Gateshead, West (Mr. Horam) emphasised yesterday that the Committee should take all possible measures to reduce the effect of a reviving inflation rate which will take place in the autumn. That was the motive behind the Social Democratic and Liberal parties' proposal yesterday that VAT should be reduced in the autumn and is part of the motive for the proposal that, as from 1 August, the National Insurance Surcharge Act 1976 should be repealed. I welcome the fact that some companies, in a patchy way, are reporting a rather better rate of return in their profit statements over the past few weeks. But it is sad that the real rate of return on industrial and commercial companies, if North sea oil activities are excluded, showed a slight falling back in the fourth quarter of 1982. The real rate of return is estimated on average to be under 4 per cent.
No industry in the present competitive industrial world could survive for very long in a healthy condition on a real rate of return of under 4 per cent. As the surcharge represents a direct reduction in profits, it is eating the seedcorn of industry in a blatantly uneconomic way to help the Government pay the social costs of the unemployment that they have created. The alliance considers that this tax has long overstayed its welcome. It is one of the godparents of unemployment. It is high time the Government repealed the Act.

Mr. Campbell-Savours: The Economic Secretary to the Treasury intervened at the Dispatch Box to point out that a Labour Government introduced the surcharge legislation in 1976. That was in different circumstances. A different configuration existed in the tax system as it affected corporate bodies in 1976, which arose from the stock relief provisions that were introduced by the previous Chancellor of the Exchequer. A different configuration also existed at that time in the labour market, with different skill shortages and excesses, and different levels of employment in various parts of the United Kingdom. There was a different configuration of industrial support from the Government.
Whereas the Labour Government were willing to intervene to protect and support industry, where necessary, by long-term restructuring arrangements that were beneficial to it, the Conservative Government have refused to intervene. It was not right of the Economic Secretary to say that because the Labour party introduced the tax it should bear responsibility for its present existence. We are not responsible for that. The hon. Gentleman is aware that since this Government's election and the implementation of their strategies my right hon. and hon. Friends have demanded the removal of the surcharge, because of the damage it is doing to British industry. [Interruption.] If the Economic Secretary does not accept what I have said, instead of intervening from a sedentary position, he should make a statement so that it is on the record. Then I will reply.

Mr. Bruce-Gardyne: It is perfectly true that the hon. Gentleman's right hon. and hon. Friends began to clamour for the abolition of the tax that they had introduced from the moment that they ceased to have responsibility for its administration. It is easy to do that.

Mr. Campbell-Savours: The hon. Gentleman has said that the clamour began from the date that the Labour party ceased to have responsibility, but that is not the point. The Labour party began to demand the abolition of the national insurance surcharge when it realised the damage it was causing to the economy within the new financial constraints of the Conservative Government's first Budget on 12 June 1979.
The Government have listened to the Labour party's attitude and views on exchange rates. Yesterday my hon. Friend the Member for Blackburn (Mr. Straw), in a useful and interesting contribution, drew attention to the substantial reduction that has occurred in the value of sterling since the argument became public last year. It is interesting to note in retrospect that whereas a few months ago the Government were accusing the Labour party of being irresponsible in its recommendations for a further devaluation in sterling that same Government have now refused to intervene on the exchanges and have allowed sterling to fall to as low as $1·46. That shows that they recognise the sanity in our proposal. I trust that the Labour party's critics at that time will have that matter slapped in their faces at the next general election. I hope that it is drawn to the voters' attention that it was the Labour party that did the positive thinking and that understood what was necessary in the interests of British industry.
As we heard yesterday, the chairman of the chamber of trade in Blackburn said that for the reasonable future a competitive exchange rate must be secured for British


industry to be competitive. Even so, the effective devaluation has been marginal. As we all know, sterling is now rising on the exchanges. However, it cannot make up for the damage that has been done to the British people since 1979 by this Government. As has been pointed out, there has been a 15 per cent. reduction in output. There has been a collapse of even worse proportions in the textile, chemical, paper and steel industries and in many other parts of our manufacturing base. We are all aware of that, because every week we are confronted by industrialists in our constituencies, who demand action to protect them and to help them become more competitive.
Those industrialists are not simply asking the Government to introduce fiercer employment legislation to enable them to hold down wages and to increase the pool of the unemployed so that the labour market operates in their favour. They are asking the Government to make financial legislative changes that will have an immediate effect on the payroll costs. One of the most notable costs is the national insurance surcharge, which acts—as the hon. Menher for Colne Valley (Mr. Wainwright) pointed out—as a payroll tax of inordinate proportion. While the Government whistle in the wind, with their platitudes about the upturn, prominent organisations refute the Government's statements and are making every effort—[Interruption.] The Economic Secretary spends most of his time lying across the Bench, making noises and groaning into the nearest microphone. I wish that he would reply to my suggestions from the Dispatch Box, instead of responding in that way.

Mr. David Winnick: Is it not quite likely that the Economic Secretary is acting in that odd way because he is thinking of what he is going to write in the editorials of the Daily Telegraph, in the event that he becomes its next editor?

Mr. Campbell-Savours: If that is the case, the Economic Secretary would do well to precis the speech made by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and publish that in the Daily Telegraph. I am sure that he would find that there was more support for that among the Daily Telegraph's commercial readers than for his contributions, which blatantly and openly misrepresent the facts about the economy.
The NEDO working party commented on the national economy and foresaw an increase in unemployment in its sector up to the end of the decade. Many committees expected there to be a further reduction in employment. It will be shattering news to many of our constituents when they hear that the Government accept the pursuit of a strategy that ensures that people will remain on the dole queue until the end of the decade.
The CBI published a statement of its demands following its request that the Budget statement should introduce measures to remove the national insurance surcharge. Most of those demands have not been recognised by the Government. Indeed, they refused to implement them. In the report that the CBI produced only this week and that is based on a survey of, I think, 1,700 firms that make up its membership, it said that 64 per cent. of its membership was no more optimistic about business prospects than it had been four months ago, at the time of the previous survey.
The CBI added that talk of a boom was premature, as the recovery was starting from a low level of activity.

Indeed, 84 per cent. of the CBI's membership failed to report a rise in the volume of orders, and 75 per cent. of its membership did not expect further and larger rises in output in the next four months. Seventy-two per cent. of its membership reported that they were working below capacity. The CBI pointed to further escalating unemployment, although at a diminished rate. Only 11 per cent. of its membership expected an increase in employment. It also pointed to an increase in the rate of price rises in the coming months. On stocks, the CBI said that only 13 per cent. of companies expected an increase in work in progress.
Under the general heading of "Constraints" the CBI said that the major limitation on companies' output continued to be the lack of demand, although the 89 per cent. which expects lack of orders or sales to limit output in the next four months is the lowest for three years. Again, 89 per cent. expected a lack of orders or sales to influence their decision on increasing output. I would have thought that a high figure, but it illustrates that it is possible to wrap up the CBI's report in very different language. It is possible to pull out very different indicators from those given by the Secretaries of State for Industry and Trade and the Prime Minister in the past four days.
Some of us must ask why the CBI chose to present its report in that way when it knew that its membership was saying the very reverse in regional reports. In addition, the CBI's membership is drawing the attention of its regional officers to the lack of demand throughout the United Kingdom. One can make the figures say what one wants. That is what I have done. Equally, the Government have done that. That is why the British people should not believe the Government and the statements that they have made in the past few days on the CBI's report. No one can believe the Government on such matters. At about this time of year we always get an annual statement from the Dispatch Box that draws attention to the changing circumstances and to alleged ameliorations in the economy. We all know that things have not got any better. Ministers know that, yet every year they persist in the ritual of trying to convince the British people that we are running along the bottom of the recession's trough and that things can only pick up.
The Chancellor of the Exchequer is now famous for his false dawns. As The Guardian so beautifully put it this week,
Would you now buy a secondhand inflationary recovery from the Chancellor of the Exchequer?
The answer is no, and nor will anyone else in British industry. Factories close every day. The recession deepens. Only this afternoon there was a further announcement in my constituency that 62 more jobs have been lost at Spillers. Over the years that company has made a valuable contribution towards providing work for my constituents.
We cannot go on like this. These things must stop. That is why, once again, we rise to speak in support of the new clauses and amendments, and say that the Government should restore demand to the economy and should remove the national insurance surcharge, which is now penalising British industry in an unparalleled way.

Sir Kenneth Lewis: The hon. Member for Workington (Mr. Campbell-Savours) seemed to admit that he was making of the CBI report what he wanted to make of it. I am sure that the report is correct,


because it was produced on the basis of soundings throughout the country. I am not aware that the CBI said that the economy is bounding upwards. It said that there was a sign that things were improving, but did not go much further than that, which was correct. There is a sign that things are improving, but they have to go a good way yet before we — never mind the hon. Member for Workington—shall be satisfied.
I was interested to hear the speech of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), and that of the hon. Member for Colne Valley (Mr. Wainwright). A long time ago, in 1951, I fought Ashton-under-Lyne and the Tory vote was a little better then than it has since become. It is a place for which I have some regard. I always thought that the Lib-Lab pact probably arose because the right hon. Member for Ashton-under-Lyne and the hon. Member for Colne Valley were so close to each other that they could get together and fix it. In those early days, I was involved with a neighbouring constituency. I saw the Liberal party lose in Colne Valley.

Mr. Robert Sheldon: To bring the hon. Member up to date with the circumstances of Ashton-under-Lyne, I would point out that they are by no means as happy as they were at the time he fought his election. In the past four years, a quarter of our firms have closed.

Sir Kenneth Lewis: That is a particular of the right hon. Gentleman's constituency and there are other places where a similar story can be told. It is not entirely due to what happens in this country. It is because there is a recession.
The Lib-Lab pact seems to be on again this afternoon. Having both supported the national insurance surcharge, the two parties now want to get rid of it. When they worked together they not only did not get rid of the surcharge in total, but did not get rid of any of it. They added to it, and made it worse. I want to get rid of this tax. In the present circumstances, it is a daft tax. I give credit to the Government for bringing the rate down while they have been in office. If there is one thing that I have learnt in the time that I have been in the House, it is that it is easy to put taxes up. The higher one puts tax up, the slower it is in coming down. That applies to whichever party is in office.
If anybody is to blame for the national insurance surcharge, it is the right hon. Member for Ashton-under-Lyne and his hon. Friends when they were in government, not because they put the tax on—there might be a case for some sort of tax—but because they put it up too high. They allowed it to become so heavy that any future Government would find it difficult to take all of it off in two to three years because it would restrict the way in which they could reduce other taxes. The Government have wanted to reduce other taxes and have therefore had to go more slowly than I should like on reducing national insurance surcharge. At one stage in the Budget I thought there would not be any further reduction, and that my right hon. and learned Friend the Chancellor was going to rest on the 0·5 per cent. reduction of last year. I was pleased, and I am sure that British industry was pleased, when he announced a further reduction, as that will help British industry during this year.
It is, however, ridiculous to continue with this tax because, it is a tax on labour—an employment tax. I wo0uld call it not the national insurance surcharge, but the national industrial tax on employment. I want to see it go, as there is no justification for it continuing in the present circumstances. We are presently subsidising jobs. There are many complaints that the Government are not doing much to stimulate the economy, but during the past 18 months there has hardly been a Ministry that has not spent £10 million, £20 million or even £100 million on packages of Government support for industry right around the country. Soon we shall have the youth training scheme which will cost a large amount of taxpayers' money. We must remember that it is not just Government's money but taxpayers' money as well. The Government are spending a great deal of money to stimulate employment in various ways, so there is nothing to be said for keeping on a tax that encourages, and will continue to encourage, employers to maintain their employment levels and not add to them, or even to get rid of labour.
There is also the problem of the future effect of technology on industry to consider. It is interesting that at a time when we have a recession firms have to lay off labour—those that are in business at all—and others are closing because they do not have the markets either because of imports or because they no longer have export markets. There is a heavy stimulation and encouragement to add to our technology. There is therefore a world recession plus the impact of new technology imposing itself, across the board, on British industry. This new technology has gathered pace since the recession and will double in the next two or three years. That will mean that as things get better and we get out of the recession there will be a further squeeze on employment because of this new technology. As we get out of the recession, there will therefore not be the same increase in the number of jobs that many of us as politicians would like to see or think that there should be.
Unemployment will continue because this new technological development has enabled goods to be produced with less and less manpower. Because of that, it must be for us in the Conservative party as we go into the next general election to say that this payroll tax will go. The present Government have brought it down, and can justify having done so over the past four years. If I am right in what I have said about the impact of technology, clearly this tax must go in the next Parliament. I do not suggest to my right hon. and learned Friend the Chancellor that he gets rid of it at this minute, but it must be an early objective in the next Parliament.

Mr. Tony Marlow: I have followed my hon. Friend's argument carefully, and I have much respect for what he is saying. However, is he not being a little pessimistic about the outlook for jobs? Given the Government's economic policies and the fact that our manufacturing industry is becoming more effective and efficient, and that we shall be able to produce more goods and therefore more wealth with fewer people, surely more money will go into the consumer's pocket and we shall be able to spend more on services. Little services will be big services and it is possible that—

Mr. Austin Mitchell: Everyone will then buy German cars.

Mr. Marlow: —within a relatively short time the present great gloom that we have about unemployment will be reversed. Does not my hon. Friend agree that he is being a little pessimistic?

Sir Kenneth Lewis: I wish that I were. I am a realist and I do not believe that, whichever Government are in power, there is a total solution to unemployment. I do not believe that it will return to the 1 million level that was considered acceptable when I came into Parliament.

Mr. Campbell-Savours: When?

Sir Kenneth Lewis: When I first came into Parliament, unemployment in Britain was a little more or less than 1 million.

Mr. Oswald O'Brien: Which year?

Sir Kenneth Lewis: When I came into Parliament—in 1959, 1960, 1961—unemployment was low.

Mr. O'Brien: Is the hon. Gentleman saying that it was 1 million?

Sir Kenneth Lewis: I am saying that under no Government shall we get back to a figure of 1 million unemployed. The new technology that is being developed throughout industry—not only in British industry but in all industry round the world — will make that impossible. As we come out of the recession we can reduce unemployment by a reasonable amount, although I should not like to put a figure on it. Perhaps we can reduce it by 1 million as a result of an increase in trade in Europe, America and elsewhere.
We shall then have the problem of what to do with the remainder of those unemployed. That is where the new technology will mean that there is no scope for any further reductions. That is a problem for Government in future. Therefore, this tax cannot be other than temporary. If it does not go in this Parliament, it must go soon after.
When we debate a new clause such as this, we naturally talk of it in the context of high unemployment, but we must consider that unemployment is not necessarily a disaster if we learn to share out the work. However, sharing out the work does not allow for a tax of this kind because it would simply make such a step impossible for employers.

Mr. John Horam: I congratulate the hon. Member for Rutland and Stamford (Sir K. Lewis) on his temerity in making a speech from the Conservative Back Benches in support of the Government. It showed some of the perils of embarking on that course in an economic debate. Government supporters have been fairly rare specimens over the past three days in our discussion of the Finance Bill. The only other Conservative Member who has spoken is the hon. Member for Northampton, North (Mr. Marlow) and that was yesterday. The hon. Gentleman's speech can hardly qualify as one in support of the Government since he too took a somewhat contrary line, just as the hon. Member for Rutland and Stamford has. He wanted not merely to reduce VAT, as proposed by the Labour, Social Democratic and Liberal parties, but to abolish it and replace it with purchase tax. That is an interesting piece of nostalgia. I prefer purchase tax myself.

Mr. Austin Mitchell: The Common Market stopped that.

Mr. Horam: As one who voted against entering the EC, I regard that as one of the least pleasing aspects of our present membership.

Mr. Marlow: The hon. Gentleman says that he is nostalgic for purchase tax in preference to VAT. Will he acknowledge that as long as we have the present arrangements with the EC we have no rights in this matter because our civilian powers have been conceded and we must retain VAT?

Mr. Horam: That is a correct statement of the position, but it is none the less—unfortunately perhaps —one of some nostalgia rather than realism.
The hon. Gentleman will also be united with his hon. Friend the Member for Rutland and Stamford because today, like yesterday, they will be voting against amendments which they support—the one an attempt to do something about VAT and the other to do something about the national insurance surcharge. I suspect that that view is held by many Conservative Back Benchers and that that is why their attendance has been so lamentable during the past three days. If the public knew just how few Conservative Members cared about the problems of unemployment and the economy, they would be even more of a public spectacle than they are today.

Mr. Campbell-Savours: rose—

Mr. Horam: I shall not give way. I do not want to speak for too long and the hon. Gentleman has already made one contribution. I know that other of his hon. Friends also want to speak.
One of the Government's outstanding characteristics is that at a time when the overwhelming problem—as all admit—is one of industrial decline, they have had no strategy for business expansion. From the beginning, they have never asked themselves what the necessary conditions are in which industry can have confidence in the future and can plan on a long-term basis. Instead, from the beginning they have imposed on industry their own narrow and rigid view of what is best for it.
In addition, the Government's priorities have been equally inflexible. They have chosen at all times and in all circumstances to say that inflation is the mumber one enemy. As far as one can detect from what has been said in the twists and turns of the Government's economic policy over the past four years, they have also tried to "deal" with the unions. The measures that they have chosen to tackle their priorities have been the cause of their downfall. Their policies in pursuit of those two objectives have been simply old-fashioned deflation, more unemployment to terrify the trade unions, and more unemployment to reduce inflation.
That is why we have had such an appalling record of economic growth and general industrial improvement; why production has dropped by nearly one fifth since the Government took office; why investment, according to the CBI, is down by one quarter since 1979 — indeed, investment is down by one third if leasing, which has become more popular in the past few years, is ruled out —and why research and development expenditure has been cut to the bone and, indeed, in some cases, through the bone. That is why cost competitiveness is still a quarter worse than it was in 1979: why import penetration is at a much higher level; and why profitability is so low in real


terms. One could go on endlessly describing the appalling picture that we see before us of the real state of industry compared with the calculations in the Red Book and the Blue Book which the Minister puts before us from time to time.
The Government have simply thrown out the baby with the bath water in pursuing their aim to reduce inflation. Not only have the Government brought about this terrible scene, but they cannot offer any hope for its improvement. Their method of dealing with inflation and trying to achieve more industrial harmony is deflation, and as soon as inflation rises, as it will later in the year, they will have to impose more deflation. As a consequence, we will bump along the bottom of the true and proper path of economic growth rather than attempt to lift ourselves into a sustained period of expansion.
Great play has been made over the past few days of the report of the CBI and other forecasts that there may be a small improvement—some small lifting off the bottom. Unlike the hon. Member for Workington (Mr. Campbell-Savours)— indeed, unlike the Government —I believe there is improvement, even though it is small and patchy. I accept that the CBI's "Quarterly Survey of Industrial Trends" is a reliable, accurate and on the whole unbiased picture of what is happening in British industry. In those circumstances, it is a pity that the CBI president and others have found it necessary to say the things they have said over the past few weeks—for example, when the Prime Minister attended the CBI dinner. It is a pity that the CBI feels it necessary, with a general election looming, to ally itself with the Conservative party. It is equally a pity that the TUC is so closely in tune with the Labour party. This is part of a regrettable polarisation of our society. It gives credence to the idea that the CBI's accurate and independent forecasts are subject to political bias, which I am sure they are not.

The Chairman (Sir Michael Shaw): Order. I am finding it difficult to relate what the hon. Gentleman is saying to the new clause.

Mr. Horam: What I am saying is deeply relevant to new clause 4. The new clause is designed to reduce industrial costs for which the CBI has called in report after report and pre-Budget statement after pre-Budget statement. It is highly relevant that the CBI view should be called in aid in support of new clause 4. I apologise if I appear to be labouring the point.
Having considered the CBI report, one should not neglect the report of the sector working parties of the National Economic Development Office. An article in The Guardian says of the report:
NEDO's report, which was compiled from assessments made over the past year by 40 different sectors of industry and commerce, is among the most gloomy long-term forecasts prepared in recent years.
Boiling down the comprehensive data and forecasts of the 40 industrial sectors, the report warns of poor employment prospects, skill shortages, and poor vocational training, an overcautious financial community, too little spending on research and development, continuing structural change in key industries such as engineering, and lack of Government help to assist industry.
If the Government really wish to give people an accurate view, as they pretend they do, it behoves them to summarise what the NEDO sector working parties have said and place that summary in the Library. If they insist

on suppressing the report, which I am sure is objective, they should at least, in the spirit of contributing to a real debate on our economic prospects, give the House the information about what NEDO is saying. NEDO is addressing itself to the fundamental problems that are of concern to all who work in industry, on whatever side they may be, and of great concern to the House. The Chancellor of the Exchequer cuts a poor figure when he tries to dismiss the NEDO report by saying that it took no account of the recent improvement due to the fall in the value of sterling. The NEDO report is not about the short term but about our long-term fundamental industrial problems to which the House should be addressing itself and the Government should be addressing themselves with more single-mindedness than they have hitherto shown.
In defence of their position the Government would argue that industry is leaner and that, although we have seen a large increase in unemployment, industry is now in a better position as a result of de-manning and so on. It is true that, in some respects, we are leaner than we were, but it is largely a myth that there has been a great improvement in productivity. We are leaner but also weaker. In an article on 14 March on British manufacturing industry, the Financial Times made that plain. Under a headline "Leaner … but Weaker" the article said:
After three long years of recession and an over valued pound, Britain's manufacturing industries are leaner than ever, but large parts of them are certainly not fitter.
The article went on to point out at some length the sectors of industry that fall into that category.
The Government's second defence of their handling of industrial policy and industrial costs is that industry is not only leaner but attitudes have changed. In discussing that matter they tend to call in aid what has happened, for example, at British Leyland. They point to improvements in British Leyland's marketing and industrial performance over the past few years to vindicate the measures they have taken on the economy.
Although we have today discussed the Lib-Lab pact in a rather jocular way, it is a fact that Sir Michael Edwardes was appointed by a Labour Secretary of State for Industry in 1977. In his book "Back from the Brink", which I have been reading recently, Sir Michael says that many of the improvements that he got under way were made in the years 1977, 1978 and 1979, before a Conservative Government came to power. Sir Michael makes it equally plain that the biggest threat he faced when he was in charge of British Leyland was the enormous increase in industrial costs and the loss of export competitiveness following that huge change in the value of the pound in the first three years of the Conservative Government. That rocked British Leyland back on its feet and made it impossible for the company to recover properly within the time scale that the Labour Government, and subsequently the Conservative Government, presented to it. Those problems arose because of a Conservative Government who were unaware of the consequences of their economic policies for the industrial improvement that Sir Michael Edwardes was trying to bring about.
My point is that it is possible to bring about the supply side improvements that are definitely needed in this country without having the repressive fiscal regime to which the Government are committed. We can on the contrary have supply side improvement in an expansionist atmosphere which we on the Social Democratic and


Liberal Benches support through new clause 4. We shall get those supply side improvements and at the same time get improvements in productivity, research and development expenditure, investment and productivity, which will not come from the Government's approach, however long they remain in office. It is a tragedy that when our national priority is so clear, we have a Government who are so threadbare and impoverished in their approach that they will never be able to get British industry expanding in the way of which it is capable.

Mr. Marlow: If what we have just been listening to is "the new politics", you, Sir Michael, will probably agree with me that it is not really likely to catch on.
We have been told that the trouble with the two old parties is that they spend all their time slanging each other. We have just heard the hon. Member for Gateshead, West (Mr. Horam) slanging first Her Majesty's Opposition and secondly Her Majesty's Government. We in the two main parties do not have a monopoly on slanging. I should think that the Committee has heard more slanging from the hon. Member for Gateshead, West today than it has heard all week.
I have not been greatly persuaded by the arguments of the hon. Gentleman. He said that, on the one hand, the Labour party has certain policies and, on the other hand, the Conservative party has certain policies. He said that Labour party policies will not work and that Conservative party policies will not work and that, somehow or other, we must split the difference and come down in the middle. I believe that the opposite is the case. I am convinced that the policies advanced by Her Majesty's Government have been successful, are becoming more successful, will succeed and will bring about a new dawn for this nation.
I believe also that the hon. Member for Grimsby (Mr. Mitchell) and his colleagues have some real ideas and believe that if their ideas were brought into effect they would have beneficial effects on the nation. Our policies are working and will work and the Opposition believe that their policies might work.
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But to suggest that we can bring forward policies that are right in the middle—not making any decisions and splitting the middle on every issue—is absurd. Even new clause 4 is halfway between the existing situation and new clause 2. It seems that the alliance is suggesting that for ever we should mudge and fudge and for ever go down the centre line. That is no policy at all. That is purely a negation of responsibility and an example of not being able to make up one's mind about anything. That is a waste of time and a fudge. The result is that there are no convincing ideas to put before the electorate. I am sure that we are going to find out that this approach will reap its own negative reward in the not too distant future.
Yesterday I did my utmost to help the hon. Member for Gateshead, West. The hon. Gentleman said that he was looking for signs of recovery. After he resumed his place, I had the opportunity to tell him that the chairman of ICI, Mr. Harvey-Jones, who I understand is a member of the hon. Gentleman's faction—

The Chairman: Order. I am listening for references to the new clause.

Mr. Marlow: Sir Michael, may I put it to you that as the remarks of the hon. Member for Gateshead, West were relevant to the new clause, if I respond in kind to what he was saying that would likewise—

The Chairman: Order. I intervened in the speech of the hon. Member for Gateshead, West (Mr. Horam) and I think that he appreciated my point. I trust that the hon. Member for Northampton, North (Mr. Marlow;) will equally appreciate the point.

Mr. Marlow: Of course, Sir Michael.
We are very much concerned about the industrial recovery that is taking place. The hon. Member for Gateshead, West said that he was concerned about the industrial recovery and that his new clause is predicated on the basis that it will help to accelerate the industrial recovery. No doubt he will know that the profits of ICI have more than doubled. I suggest to him that he gets in touch with that member of his faction, Mr. Harvey-Jones, because he will then brief himself rather better on the subject.

Mr. Brittan: It seems that Mr. Harvey-Jones is a pillar of the faction of the hon. Member for Gateshead, West (Mr. Horam).

Mr. Marlow: Yes, he is one of the few. May I further reassure the hon. Gentleman about the industrial recovery about which he is so concerned, quite rightly. Had he been with several of my hon. and right hon. Friends at a meeting with IBM today, he would have heard from its representatives that they are convinced that the United Kingdom is on the threshold of recovery and moving into recovery. Not only that, it is doing rather better on the road to recovery than other major countries in the EC such as France and Germany. I am glad to be able to reassure him on those points.
I am surprised, amazed, overwhelmed and breathless that Her Majesty's Opposition have tabled the new clause. Nobody likes this tax. Nobody likes any tax. But it was Her Majesty's Opposition, with their Liberal supporters, who brought this tax forward in the first place. Her Majesty's Government, God bless them, have reduced it by about 2½ per cent. They have removed a burden of £2,000 million from the shoulders of industry and allowed industry to retain the money for its own investment, improvement and recovery, and for improving its efficiency. Industry has taken advantage of that.
For Her Majesty's Opposition to suggest that we are the villains of the piece when the villainous tax was theirs in the first place—well, it is absurd.

Mr. Campbell-Savours: This is the worst speech that the hon. Gentleman has ever made.

Mr. Marlow: This tax now raises £780 million in a full year. We are all here to help industry. If Her Majesty's Opposition were to abolish the tax and not raise £780 million, they must ask themselves what they would do. Would they increase Government borrowing by £780 million? They probably would. Alternatively, would they raise the sum by a different form of taxation?
Let them increase Government borrowing by £780 million. What effect do they think that that would have on confidence in Her Majesty's Government, or confidence in the revival of the United Kingdom economy at this


stage? If £780 million were to be slashed and thrown away from Government resources and Government income, what effect would that have?

Mr. Robin Cook: Perhaps the hon. Gentleman would like to share with the Committee the effect on confidence of last week's discovery that the Government were borrowing £1·7 billion more than they thought.

Mr. Marlow: I think that the hon. Gentleman knows full well what the answer is to that question. What we are talking about now is what should be done in future. A lot of that increased figure that the hon. Gentleman is talking about—I am surprised that he is prepared to raise the issue in a form such as this—is due to overspending by local authorities, and the vast majority of those local authorities are doctrinaire and dogmatic Labour-controlled authorities. I am surprised that the hon. Gentleman is not ashamed—

The Chairman: Order. We cannot pursue that matter now. Doubtless there will be other occasions when it can be discussed. Let us return to new clause 4.

Mr. Marlow: I apologise, Sir Michael. I was provoked. I should not have allowed myself to be provoked and I apologise profusely.
So we do not raise the £780 million and the Government have to forgo £780 million of their revenue. What is going to happen to sterling? What is going to happen to inflation? What is going to happen to interest rates? We know what will happen to sterling. We know what will happen if the Government, who have an economic policy, suddenly throw it out of the window and cease to draw the money that they need to balance their books.
What is the international community going to think in those circumstances? The Opposition know full well that there would be a loss of confidence in Her Majesty's Government. With that there would be a fall in the value of the pound, an increase in interest rates, an increase in inflation and massive wage claims. We would be back on the same old wretched cycle again. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) knows that and I am surprised that he is prepared to raise these matters in front of the Committee.
That is what the Opposition suggest, and I think that it is irresponsible. The alternative would be to raise the revenue in different ways. How are we going to do that? Is that going to be done by increasing income tax? Surely one of the most important things that the Government did in the recent Budget was to increase the tax threshold on which our ordinary people have to pay their taxes. Let the people keep the money in their own pockets. By so doing they are able to make their own choices with their own money to buy from our industries, therefore making our own industries more busy and bringing more jobs into our industries. Having so done, they will have made our industries more efficient and more able to tackle foreign markets that are important to us for the continuing recovery on which we are currently launched.
This is an irresponsible new clause—I am sure that you agree with me, Sir Michael—and I shall take a lot of pleasure in voting against it.

Mr. Winnick: I think that the hon. Member for Northampton, North (Mr. Marlow) took the view that he

had made so many speeches and interventions critical of the Government that he had a moral duty to try to defend them today. Obviously, he has done his best.
I regard the new clause as a measure to try to save jobs and to reverse the tide of unemployment. As one would expect, we have heard much from Treasury Ministers about recovery. In the past few days they seem to have been aided by the CBI. Labour Members are naturally suspicious that this is pre-election talk. In the west midlands we continue to lose 1,000 jobs a week. Obviously we want the Government to take the action that is outlined in the new clause.
The west midlands has been decimated in the past few years under this Government. In the past three years it has lost 319,000 jobs. That loss, when expressed as a percentage, is greater than the loss that has been suffered in any other region. Britain's overall loss of jobs was about 9·5 per cent., but in the west midlands it was over 14 per cent. As a result, one in five of the male work force in the west midlands is now out of work. If that is not a grave position, I should like to know what is.
It is all very well for Treasury Ministers and the Prime Minister to speak about the recovery that is taking place and to express optimism. We have an obligation to examine the position as it really exists, particularly the way it affects our constituents, and when we examine it from that angle we see that there is little cause to share the Government's enthusiasm. We must consider not only the numbers unemployed but the periods for which they have been unemployed. In January of this year, four out of 10 unemployed people in the west midlands had been out of work for more than a year. The hon. Member for Northampton, North asked how our proposals would be financed. In reply, I must ask him how he thinks the unemployed are being paid unemployment benefit, supplementary benefit and the rest.
Let us consider the position just before the Conservatives came to office and the position now. In April 1979, 34,000 people in the west midlands had been unemployed for over 12 months. Today, the figure is 150,000. That is surely an indictment of the Government's policies. It reveals the devastation that has occurred in the west midlands. If recovery is on the way, the first signs of it should be occurring in the west midlands, the heartland of the engineering industry. Far from there being any signs of recovery, the opposite is the case.
In the Walsall travel-to-work area, when the Government took office 2,495 people had been unemployed for 12 months or longer. Today there are 13,452 such people. Anyone who is familiar with the area, and particularly the black country, will know that, where previously there had been much industrial activity —allowing for all the problems that existed before the Government took office; I am not suggesting that there were no problems—today one sees factories and other industrial establishments closed down all over the place. Instead of industrial activity we find derelict areas. I often say that if one wants the best illustration of monetarism and Thatcherism, the best area to visit is the west midlands and the black country. There one sees what this Government's policies have achieved in four years, with some people having almost given up hope of working again.
Nobody of course is suggesting that the abolition of the national insurance surcharge is all that is necessary to restore employment and industrial activity in the west


midlands. It is however one useful measure that we can take and, naturally, we on these Benches are bound to support it. The circumstances today are totally different from those which existed when the surcharge was introduced by a Labour Government. Its abolition would provide more job opportunities and prevent some of the redundancies which are now taking place.
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It is impossible to go round parts of my area without meeting people who have been unemployed for considerable periods. As I meet and talk to them, I discover that about one in three has been unemployed, and many of them explain how they have been unemployed for some time. I agree with my hon. Friends that we need more than just this new clause. We need an expansion of the economy, an end to deflation and an increase in demand to provide job opportunities and get industry anywhere near the position it was when the Government took office. A whole range of measures will certainly be needed if that is to be achieved.
What Labour has outlined in its programme has been heavily criticised by Conservative Members. It is interesting to note that when some time ago we suggested a more realistic exchange rate, that too was attacked by the Government; they said that such a step would cause great harm to Britain. The more realistic exchange rate which we have seen in recent months has clearly helped industry. Other measures which we are advocating would be equally beneficial, including the abolition of the national insurance surcharge.
The west midlands needs new industries and the application of new technology. We rely on too narrow an industrial base; that too has been part of our trouble in recent years. First and foremost, we need a reversal of Government policy. Indeed, the only way to turn the tide in that area and provide opportunities for more people to earn a living is for the Government to accept the need to change their policies.
For some time my hon. Friends—and a few hon. Gentlemen opposite — have been warning Ministers about the effects their policies are having on the west midlands and, late in the day, they have appointed what has been described as a Minister for the west midlands, an Under-Secretary of State for Industry, and they seem to believe that that will persuade the people of the west midlands that the Government are taking effective action to revitalise industry in the area. The people there will not be so convinced. They will look on it as a gimmick.

Mr. Marlow: He is a first-class man.

Mr. Winnick: I am not here to argue the qualities of the hon. Gentleman. I have said in a previous debate that sending a Minister to the west midlands for perhaps two days a week will hardly resolve the problems of the region, when so much of the trouble stems from Government policy. Obviously, it being a pre-election period, the Government think that such a move will persuade people that firm and effective action is being taken. I warn the Government that unless action is taken to reverse the tide of unemployment in the west midlands and assist the region—I am not alone in issuing this warning; it is a view taken not only by politicians but by many people with long experience of industry in the area — the region could go into a permanent decline.
I do not know whether there is much use trying to persuade the Government, after four years and all the

damage that they have clone to the west midlands, that there is a real crisis in the region. Perhaps the Chief Secretary will bear in mind some of my points when he winds up. It would be a great tragedy not only for the west midlands but for Britain as a whole if the manufacturing industry in the west midlands went into a permanent decline. Much of the responsibility for that decline lies with the Government.

Mr. Brittan: The debate has ranged widely, but it focuses upon, and should be totally devoted to, the proposition put forward by the Labour, Social Democratic and Liberal parties that the national insurance surcharge should be repealed forthwith. Frankly, I regard it as nothing less than unparalleled effrontery and unrivalled hypocrisy for the Labour, Social Democratic and Liberal parties to make that proposition. They introduced the national insurance surcharge. It came into effect on 6 April 1977 at a rate of 2 per cent. The legislation was contained in the National Insurance Surcharge Act 1976. The rate was increased to 3½ per cent. in October 1978. That legislation and that increase were introduced by the Labour party with the acquiescence, if not the support, of its then allies in the Liberal party. The Social Democratic party did not exist, but all those who now lead the Social Democratic party were contented members of the Labour party, if not the Labour Government, happy and ready to troop into the Division Lobby in support of the introduction of the tax that they now so roundly condemn and readily call on the Committee to abolish. It is unparalleled effrontery and unrivalled hypocrisy for them to dare to make such a proposition.
Some of those people may be slightly troubled in their consciences by the contrast between introducing a piece of taxation that was unknown to the country before they thought of it and virtually doubling it, and suggesting that it should be repealed. What have those who are remotely troubled by that inconsistency to say by way of explanation?
The hon. Member for Workington (Mr. Campbell-Savours) who is usually quite candid and robust in his views, however repellent they may be to Conservative Members, none the less on this occasion managed to find a euphemism to justify the complete contrast between introducing this tax in 1976, increasing it in 1978 and seeking its immediate and total repeal in 1983. He said that what was different then was the configuration. The configuration of industry and our economy was different in 1976 and presumably in. 1978, and that justified the tax.
The hon. Member for Colne Valley (Mr. Wainwright) said that there might sometimes be a justification for a payroll tax in times of high employment, but not today. Between 1974 and 1979 unemployment doubled. The Labour Government of the day were extremely distressed. I say that to their credit, as I believe that they expressed their distress with sincerity. The present leader of the Labour party was appalled at the doubling of unemployment under the Government of which he was so important a member. They did not regard that time as being one of high employment in which one could afford the luxury of a payroll tax to finance I do not know what. They regarded unemployment as serious and disagreeable —but none the less they introduced that tax and then virtually doubled it.

Mr. Winnick: Will the Chief Secretary direct his mind to the fact that when his Government took office


unemployment in the west midlands was 5·1 per cent.? Is he suggesting that in those circumstances it was wrong for the Labour Government to introduce the national insurance surcharge? Is he aware that now, officially, unemployment is much higher, at 16½ per cent.? Does he not see the difference?

Mr. Brittan: I am very well aware of those facts. However, not only the west midlands, but many other parts of the country had high, if not higher, unemployment. Opposition Members can wriggle as much as they like, but the fact was that unemployment doubled between 1974 and 1979. If the Labour Government and their Liberal allies, faced with that situation, had said, "Unemployment has doubled, but only from a low base, so it does not matter; unemployment is not a problem. Basically, we have full employment, so we can slap a tax on employment", that at least would have had the merit of consistency and honour. However, they did not say that. They regarded the rise in unemployment under their Administration—although it is less than now—as wholly undesirable and a serious national problem. All the disadvantages of the national insurance surcharge that they rightly point out today — we totally agree with the criticisms of it—were as valid when it was introduced and when it was doubled as they are today. That did not stop them putting it forward for one moment.
Of course, the tax is a bad tax. We have no doubt about that. What we believe about the tax is shown by what we have done about it, rather than what we have said about it. What Labour does about the tax speaks much more loudly than the words which, crocodile-like, come out today and on occasions when they do not have the responsibility of office. The fact is that we have brought it down sharply. My hon. Friend the Member for Rutland and Stamford (Sir K. Lewis) was right when he said that taxes are easy to put on, but they are much more difficult to take off, particularly when the extent of the tax is increased in the way in which it was by the Labour Government.
The Finance Act 1982, barely a year ago, reduced the rate to 2 per cent. There was a further reduction in the National Insurance Surcharge Act 1982. Now there is another reduction, which my hon. Friend was good enough to say was not even expected by many people at the time of the Budget, bringing it down to 1 per cent. Therefore, it has come down from 3½ per cent. to 1 per cent. in little more than a year.
That is the Government's record. Faced with that record, the Committee will understand why Conservative Members regard it as effrontery to be told by all Opposition parties, all of whom are guilty, that we should not just bring it down, but totally abolish it.
The effect of the successive reductions on a substantial scale, costing us £2 billion, is of considerable assistance to industry, and rightly so. It is difficult to give precise estimates of the likely economic effects, but the successive reductions in the surcharge will lower unit costs and increase the United Kingdom's cost competitiveness. That will benefit United Kingdom exporters by allowing them to lower their prices or increase their profit margins. It will also make United Kingdom producers more competitive in domestic markets, although the need to improve on non-price factors must not be forgotten.
Particularly in domestic markets, many companies are likely to be under competitive pressure to pass on, in the form of lower prices, the cost reduction brought about by the successive reductions in the national insurance surcharge. That will ultimately benefit consumers and in turn lead to a higher level of consumer demand and to more orders for industry. Companies that are under less competitive pressure and retain part of the benefit are likely to increase their expenditure as a result, particularly on stockbuilding and employment. The very beneficial changes that we have been able to make in the national insurance surcharge will result in higher output, more employment and an improvement in company profitability.
6.30 pm
It is also worth pointing out that the reduction in the national insurance surcharge—of which this is the third stage—is in addition to the Government's decision to shield employers from any increase in their national insurance contribution rates for two consecutive years and to restrict the increase to 0·25 per cent. for the contracted-in in 1983–84. Even with the NIC changes, private sector employers will pay about £1·25 billion less in NIC and MS in 1983–84 than they would have done under the rates inherited from the Labour Government.
While we are considering the costs to industry and employment, let us compare our record with that of the Labour Government. Between 1977 and 1979, the combined rate of employers' NIC and NIS payments for contracted-in employees rose from 8·5 per cent. to 13·5 per cent.—an increase of some 60 per cent. in two and a half years. Well over half that increase was accounted for by Labour's introduction of the surcharge in 1977 and its subsequent action in increasing it—with the support of its Liberal allies—in October 1978.
In spite of the fact that they left us a legacy of job-destroying taxation, which has taken a great deal of time and money to reduce to a quarter of what it was when we inherited it, Labour spokesmen at the Dispatch Box today say that the whole lot should be abolished, at a cost in additional full-year revenue of £780 million.
The question how the Labour party would abolish the tax should be considered against the background of the astonishing speech with which the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) opened the debate. He painted a picture of a Britain that was crumbling, a Britain that was sadly in need of huge expenditure, for which he would be happy to sign the cheques. It is clear, therefore, that the total abolition of the surcharge would not be financed by any cuts in public expenditure. Indeed, it was to be accompanied by a massive increase in public expenditure. It would not be accompanied, however, by any increase in taxation. With the exception of a jealous and envious swipe at the imagined wealth that could be extracted from the rich, I believe that the Labour party proposes to reduce taxation. Yesterday the hon. Member for Blackburn (Mr. Straw) told us that VAT should be reduced. The package of which the abolition of the surcharge would form a part would consist, in total, of a massive increase in public expenditure and a reduction in taxation. We are told that as a result of that package British industry will boom, fresh jobs will be created and interest rates will fall. The package cannot stand up to a moment's scrutiny, and it has been utterly discredited by all serious commentators who have considered it.
Only by borrowing could the Labour party finance—or claim to finance—this tax reduction, together with the other tax reductions and the massive increase in expenditure for which it has called. Labour spokesmen pretend that a vast increase in borrowing would have no impact on interest rates, confidence or inflation, but that is not true. The Labour party's proposal to abolish the surcharge is a penny packet on the road to perdition which its programme as a whole represents. A belief that the proposal was to be implemented would lead to a total collapse of confidence.
Attention was rightly drawn by the hon. Member for Walsall, North (Mr. Winnick) to the plight of the west midlands. Other hon. Members have rightly drawn attention to the current levels of unemployment. We all have constituents who are out of work, and we all represent parts of the country where there is unemployment. The question is not whether unemployment exists, but what we can do about it and what we can do to secure a recovery. It is qute extraordinary that when signs of recovery begin to be apparent, Labour hon. Members find them unpalatable and pooh-pooh them.

Mr. Winnick: It is not happening.

Mr. Brittan: I do not ask the Committee to believe what any Government spokesman says, but to consider the facts, which are on record, and the views expressed by every economic commentator. At the moment, the Opposition are slightly split and ambivalent in their attitude. They do not know whether to say that there is a recovery but that it will not last, or to say that there is a recovery but not much of one, or to persist in saying that there is no recovery at all.
The latter view involves a massive misreading of the situation. I do not ask the Committee to listen to the Government's claims. The chairman of ICI has been described today as a member of the SDP. That was an under-statement. He is a pillar of the SDP, and the party needs more such pillars. In his capacity as the head of a great national company the chairman expressed—not in a euphoric way but in a realistic and cool-headed fashion —his belief that conditions were improving. There has also been the CBI survey. It is interesting and mildly entertaining that those who enthusiastically embraced the CBI when it was critical of the Government now shy away from it and try to explain away its views.
The hon. Member for Gateshead, West (Mr. Horam) was rather more candid. He said that the survey was objective and reliable, but added that he did not like some of the glosses put upon it by the leaders of the CBI. That is a credible view. To deny the fact that the survey shows a substantial improvement in business optimism both about the general business situation and about export prospects does no service to the serious discussion of our economic affairs. The net balance on the question of overall business optimism is positive. It has been exceeded only on three occasions—in 1959, 1963 and 1973. The CBI survey is not just a record of how people feel. It is also a report about orders. It shows that order books have improved, and that fewer firms expect a shortage of orders or sales to limit output in the next few months. There has been a small, but none the less real, reduction in the proportion of respondents working below full capacity. Demand and output are reported to have risen from a low level in the past four months, and a further increase is

expected in the next four months. That is not just sentiment. It is a report of what has occurred. Of course there has been a very low level. Nevertheless, not only the chairman of ICI, and the CBI report, but all the other major indicators tell the same story. In the three months to February, housing starts showed an increase of 33 per cent. over the previous three months and orders for new construction work increased by 6 per cent.
The important point is not that recovery started from an admittedly low base but the reason for the recovery. The reduction in inflation and in interest rates that Government policies have brought about have allowed recovery to begin in a slow and gradual but real and sustainable way. That is why the route to recovery is that which we have described. The profligate and irresponsible attempts of other parties to negate the history of their own efforts by calling for the repeal of a tax that they introduced—to be financed by extra borrowing—does no service to rational argument and should be rejected.

Mr. Cook: The hon. Member for Northampton, North (Mr. Marlow) and the Chief Secretary gave as their prime reason for rejecting the abolition of national insurance surcharge the fact that the surcharge was introduced by a Labour Government and so, presumably out of respect for the memory of that Government, it should not be removed from the statute book. If the Chief Secretary could offer the Committee the slightest prospect or the most marginal faint hope that within the foreseeable future he could bring unemployment back down to where it was when the surcharge was imposed, we should not be so vigorous in pressing him to abolish it.
The Chief Secretary taxed the Labour Government with having doubled unemployment. If by that he means that under the Labour Government unemployment rose by 600,000, I agree. He must agree with us, however, that under the Conservative Government unemployment has risen by 1,800,000—three times as much. It is against the background of that much faster increase and far higher level of unemployment that we must evaluate this tax on jobs.
There is another difference in perspective now compared with 1976 and 1977. The reason why the Labour Government imposed the surcharge is no secret. There is no need to be prim about it. We are all adults and we can face the fiscal facts of life. The Labour Government imposed the surcharge because they needed the money.
Since the Conservatives came to power, they have remorselessly unzipped the purses and pockets of the nation. They have 20 times the revenue from North sea oil that the Labour Government enjoyed, they have doubled receipts from VAT and they have boosted the national insurance contribution to the extent that it now contributes almost as much to the Exchequer as the Government receive from income tax.
Having surrounded themselves with an inward flood of tax revenue, the Government cannot possibly justify a tax for which the only possible defence was the brute necessity of raising money which was not previously available from other sources.
6.45 pm
The only measure of any significance to stimulate industry and industrial development is clause 88, which provides for the pathetic reduction of 0·per cent. in national insurance surcharge. The Chief Secretary gave a curious version of how this related to the increase in the


employers' national insurance contribution. He said that the 0·5 per cent. cut in the surcharge was sufficient to offset the 0·25 per cent. increase in employer's insurance contribution. Industry is likely to see it the other way round. Industry is far more likely to see the increase of 0·25 per cent. in the employers' contribution as offsetting half the value of the cut in national insurance surcharge.
Moreover, not all employers will benefit from the 0·5 per cent. cut in national insurance surcharge. Special measures elsewhere in the Treasury's expenditure regime will ensure that the public sector is denied any advantage from the cut. I am pleased to see that the Chief Secretary and I now agree on that. The cut will be of no benefit to the public sector, whether it be local authorities or nationalised industries. There is no rational justification for denying them the benefit that the private sector will obtain. If this is a tax on jobs, why not remove it from local authorities as well as from private industry? A job in a local authority is every bit as worthwhile as a job in private industry.
If the tax makes British industry less competitive than foreign industry, what possible justification is there for retaining it for the British Steel Corporation, which is struggling against cheap foreign imports, or British Airways, which has to fly against foreign competitors on every route on which it competes for business? There is no rational justification. The only reason for the discrimination is the vulgar prejudice of Conservative Members against the public sector.
The Chief Secretary referred to signs of recovery all around. The CBI report earlier this month is not the only recent report on the prospects of the British economy. The OECD report six weeks ago was described by the Financial Times as the gloomiest survey of the British economy ever produced by that body. A few weeks later, the National Institute for Fiscal Studies produced its forecast for the British economy. That report was described by the Financial Times as even gloomier than the institute's report for November. I do not suggest that those two bodies are necessarily more objective than the CBI in their evaluation of the prospects in a critical period for the economy, which will include a general election. I merely observe that neither has a chairman given to saying that he expects most of his members to vote Conservative.
Even the CBI report, by which the Chief Secretary sets such great store, does not provide the strong evidence of recovery that he claims. If one compares this month's CBI quarterly survey with last month's CBI monthly inquiry, which covers exactly the same sample, one finds that the number of companies reporting order books below normal has increased from 45 per cent. to 51 per cent., while the proportion reporting order books above normal has fallen from 12 per cent. to 10 per cent. There is a net movement of 8 per cent. away from the idea of recovery. I do not wish to place too great weight on the figures for one month or to suggest on that basis that we are in for a fresh slump, but there is certainly nothing in those figures to support the contention that we stand on the verge of a major recovery.
Nor, if we turn to the statements by the regional offices of the CBI in the course of last month's inquiry, do we find the enthusiasm about recovery with which the Chief Secretary sought to infect us. The statement by the northern CBI, in carefully measured terms, says:
The overall position has not been worsening.

The London region said:
The overall picture is now patchy rather than one of unremitting gloom.
The north-west region—my hon. Friend the Member for Workington (Mr. Campbell-Savours), who made an impassioned contribution to the debate, will be particularly interested in this—said:
The north-western economy is tending to mark time.
These statements and the figures on which they are based do not sustain the claim of the Chief Secretary in the debate we had last month that the evidence of recovery around us was reaching—I use the word that he used—a crescendo. [Interruption.] The Chief Secretary did indeed say that; I looked it up in Hansard this afternoon. He said that there was "a crescendo of figures" pointing to recovery.
Whether the Chief Secretary chooses to base himself on quotations from the report or on figures, I would still argue —I believe that any hon. Member who has heard what I have been describing would agree—that it cannot be said that that evidence amounts to a crescendo of figures pointing to recovery.

Mr. Brittan: The hon. Gentleman will have heard in the course of my observations some detailed quotations from the latest survey. If he does not accept that the picture is as I have described it, can he tell us what explanation he has for the undoubted fact that in the latest survey—which he is not seeking to decry—the balance of the answers on overall business optimism was that it had been exceeded only in 1959, 1963 and 1973? What is his explanation?

Mr. Cook: That is very simple. In most factories, there is an enormous sense of relief among business men that their heads are no longer being battered against the wall. Those answers are based on the question whether they expect the next four months to be better than the last four, and, given the nadir we have seen in the last four months, to claim with the enthusiasm and complacency that the Chief Secretary does that this shows that we are on the verge of recovery is to border on hyperbole.
In our debate the week before last the Financial Secretary quoted Keats when referring to the Labour party's programme for recovery. I took the opportunity after the debate of looking through my volume of Keats and I came across a line which perfectly expresses the hyperbole of Treasury Ministers in forecasting recovery on the basis of the small bump over which the economy is going as it crawls along the bottom. It is the opening line from one of his earlier poems, which is well known for its alliterative line:
I stood tip-toe upon a little hill".
That is precisely where the Treasury Ministers find themselves, straining rhetoric and toes with flights of hyperbole as they stand on a tiny bump on the index. Moreover, that bump on the index is dwarfed by the chasm into which the index has been thrust over the last four years.
Let us compare where we are now with where we have to get in order to get back to 1979. Consider investment: there is a small indication of recovery in investment in manufacturing industry. It is so small that it cannot prevent the average for this year from being below that for last year. As the CBI fairly points out, this will be the fourth consecutive year under this Government in which manufacturing investment has fallen.
In manufacturing itself, there has been a recovery of precisely 1 per cent. measured over the past 12 months. The latest figures for manufacturing output are the lowest for 15 years. The figures for bankruptcies go back beyond the last 15 years. The current figures for bankruptcies are the worst that have ever been recorded.
We can trace the record for the balance of trade rather further back than that for bankruptcies. Figures now show that in the last two months Britain has been a net importer of manufactured goods. Economic historians can trace this series back for several centuries and we can now assert with confidence that there is no precedent for this position until we get back to Tudor England. Between Tudor England and the England of the present Government there is no precedent for Britain having a net deficit on its balance of manufacturing trade.
Given that appalling record and the depth of the slump we have been through, it is offensive to hear hon. Members on the Government Benches being so complacent about the modest recovery that they claim to see at present—a recovery of such moderation that it would do credit to the SDP.
There is another dimension that we cannot forget and it is particularly relevant as we consider this tax on jobs. Even if the figures for investment, manufacturing output and bankruptcies get back to the 1979 level—and there is no sign that they will — there is not the slightest indication that the figures for unemployment will do so. The very survey from which the Chief Secretary quoted earlier provides damning evidence that, far from going down, unemployment will continue to go up. Twice as many firms in the CBI survey expect to lay off staff in the next four months as expect to increase staff. The Neddy report of last month found that, of 40 industrial sectors, in not one could an increase in employment be expected. In January the manufacturing sector lost 60,000 jobs—the highest total since June 1981. The truth is that this Government offer no hope to the unemployed and no security to those at work who live in fear of losing their jobs.
Recovery does not come when things stop getting worse; recovery does not come when M3 at long last hits target. It comes when unemployment gets back to the 1979 level and when the Government recreate the jobs that they have destroyed. Until that point is reached any talk of recovery is an insult to the army of unemployed that they have created. Tonight we will repudiate that insult by voting in the Lobby against the abject failure of their industrial strategy.

Question put, That the clause be read a Second time:—

The Committee divided: Ayes 171, Noes 237.

Division No. 136]
[6.57 pm


AYES


Allaun, Frank
Bray, Dr Jeremy


Archer, Rt Hon Peter
Brown, Hugh D. (Provan)


Ashley, Rt Hon Jack
Brown, R. C. (N'castle W)


Ashton, Joe
Brown, Ron (E'burgh, Leith)


Atkinson, N,(H'gey,)
Buchan, Norman


Bagier, Gordon AT.
Callaghan, Jim (Midd't'n &amp; P)


Barnett, Guy (Greenwich)
Campbell, Ian


Barnett, Rt Hon Joel (H'wd)
Campbell-Savours, Dale


Beith, A. J.
Canavan, Dennis


Bidwell, Sydney
Carmichael, Neil


Booth, Rt Hon Albert
Carter-Jones, Lewis


Boothroyd, Miss Betty
Cartwright, John


Bottomley, Rt Hon k.(M'b'ro)
Cocks, Rt Hon M. (B'stol S)


Bradley, Tom
Cohen, Stanley





Concannon, Rt Hon J. D.
McWilliam, John


Cook, Robin F.
Magee, Bryan


Cowans, Harry
Marshall, Jim (Leicester S)


Craigen, J. M. (G'gow, M'hill)
Maynard, Miss Joan


Crowther, Stan
Meacher, Michael


Cryer, Bob
Mikardo, Ian


Cunliffe, Lawrence
Millan, Rt Hon Bruce


Cunningham, G. (Islington S)
Mitchell, R. C. (Soton Itchen)


Cunningham, Dr J. (W'h'n)
Morris, Rt Hon A. (W'shawe)


Davidson, Arthur
Moyle, Rt Hon Roland


Davies, Rt Hon Denzil (L'lli)
Newens, Stanley


Davis, Terry (B'ham, Stechf'd)
O'Brien, Oswald (Darlington)


Deakins, Eric
O'Halloran, Michael


Dean, Joseph (Leeds West)
Orme, Rt Hon Stanley


Dewar, Donald
Paisley, Rev Ian


Dixon, Donald
Park, George


Dobson, Frank
Parker, John


Dormand, Jack
Parry, Robert


Duffy, A. E. P.
Pendry, Tom


Dunnett, Jack
Penhaligon, David


Dunwoody, Hon Mrs G.
Pitt, William Henry


Eadie, Alex
Powell, Raymond (Ogmore)


Ellis, R. (NE D'bysh're)
Prescott, John


Ellis, Tom (Wrexham)
Price, C. (Lewisham W)


Evans, loan (Aberdare)
Race, Reg


Evans, John (Newton)
Rees, Rt Hon M (Leeds S)


Field, Frank
Richardson, Jo


Flannery, Martin
Roberts, Ernest (Hackney N)


Foot, Rt Hon Michael
Roberts, Gwilym (Cannock)


Ford, Ben
Robertson, George


Forrester, John
Robinson, G. (Coventry NW)


Foster, Derek
Rooker, J. W.


Foulkes, George
Roper, John


Freeson, Rt Hon Reginald
Ross, Ernest (Dundee West)


Freud, Clement
Ross, Stephen (Isle of Wight)


Garrett, John (Norwich S)
Rowlands, Ted


George, Bruce
Sandelson, Neville


Golding, John
Sever, John


Grant, John (Islington C)
Sheerman, Barry


Grimond, Rt Hon J.
Sheldon, Rt Hon R.


Hamilton, W. W. (C'tral Fife)
Shore, Rt Hon Peter


Harman, Harriet (Peckham)
Silverman, Julius


Harrison, Rt Hon Walter
Skinner, Dennis


Hart, Rt Hon Dame Judith
Smith, Rt Hon J. (N Lanark)


Haynes, Frank
Snape, Peter


Heffer, Eric S.
Soley, Clive


Hogg, N. (E Dunb't'nshire)
Spearing, Nigel


Homewood, William
Spriggs, Leslie


Hooley, Frank
Stoddart, David


Horam, John
Stott, Roger


Howell, Rt Hon D.
Straw, Jack


Howells, Geraint
Summerskill, Hon Dr Shirley


Hoyle, Douglas
Thomas, Jeffrey (Abertillery)


Huckfield, Les
Thomas, Mike (Newcastle E)


Hudson Davies, Gwilym E.
Tilley, John


Hughes, Mark (Durham)
Tinn, James


Hughes, Robert (Aberdeen N)
Torney, Tom


Hughes, Roy (Newport)
Varley, Rt Hon Eric G.


Janner, Hon Greville
Wainwright, R.(Colne V)


Jay, Rt Hon Douglas
Wardell, Gareth


John, Brynmor
Watkins, David


Johnson, James (Hull West)
Whitehead, Phillip


Jones, Barry (East Flint)
Whitlock, William


Kilroy-Silk, Robert
Willey, Rt Hon Frederick


Leighton, Ronald
Williams, Rt Hon A.(S'sea W)


Lofthouse, Geoffrey
Williams, Rt Hon Mrs(Crosby)


Lyons, Edward (Bradf'd W)
Wilson, Gordon (Dundee E)


Mabon, Rt Hon Dr J. Dickson
Winnick, David


McCartney, Hugh
Woodall, Alec


McDonald, Dr Oonagh



McKay, Allen (Penistone)
Tellers for the Ayes:


McKelvey, William
Mr. George Morton and


MacKenzie, Rt Hon Gregor
Mr. Austin Mitchell.


McTaggart, Robert





NOES


Adley, Robert
Ancram, Michael


Aitken, Jonathan
Arnold, Tom


Alexander, Richard
Aspinwall, Jack


Alison, Rt Hon Michael
Atkins, Robert(Preston N)






Baker, Kenneth(St. M'bone)
Gummer, John Selwyn


Baker, Nicholas (N Dorset)
Hamilton, Hon A.


Banks, Robert
Hamilton, Michael (Salisbury)


Beaumont-Dark, Anthony
Hampson, Dr Keith


Bendall, Vivian
Hannam, John


Benyon, W. (Buckingham)
Haselhurst, Alan


Berry, Hon Anthony
Hastings, Stephen


Best, Keith
Havers, Rt Hon Sir Michael


Bevan, David Gilroy
Hawksley, Warren


Biggs-Davison, Sir John
Hayhoe, Barney


Blackburn, John
Heath, Rt Hon Edward


Blaker, Peter
Heddle, John


Body, Richard
Henderson, Barry


Bonsor, Sir Nicholas
Heseltine, Rt Hon Michael


Boscawen, Hon Robert
Hicks, Robert


Bottomley, Peter (W'wich W)
Higgins, Rt Hon Terence L.


Boyson, Dr Rhodes
Hogg, Hon Douglas (Gr'th'm)


Braine, Sir Bernard
Holland, Philip (Carlton)


Bright, Graham
Hooson, Tom


Brinton, Tim
Hordern, Peter


Brittan, Rt. Hon. Leon
Howell, Rt Hon D. (G'ldf'd)


Brooke, Hon Peter
Hunt, David (Wirral)


Brotherton, Michael
Hunt, John (Ravensbourne)


Brown, Michael(Brigg &amp; Sc'n)
Hurd, Rt Hon Douglas


Browne, John (Winchester)
Irvine, RtHon Bryant Godman


Bruce-Gardyne, John
Jenkin, Rt Hon Patrick


Bryan, Sir Paul
Jopling, Rt Hon Michael


Bulmer, Esmond
Joseph, Rt Hon Sir Keith


Butcher, John
Kaberry, Sir Donald


Carlisle, Kenneth (Lincoln)
Kershaw, Sir Anthony


Carlisle, Rt Hon M. (R'c'n)
Kimball, Sir Marcus


Chalker, Mrs. Lynda
Knox, David


Channon, Rt. Hon. Paul
Lamont, Norman


Churchill, W. S.
Lawrence, Ivan


Clark, Hon A. (Plym'th, S'n)
Lawson, Rt Hon Nigel


Clarke, Kenneth (Rushcliffe)
Lee, John


Clegg, Sir Walter
Le Marchant, Spencer


Colvin, Michael
Lennox-Boyd, Hon Mark


Cormack, Patrick
Lester, Jim (Beeston)


Corrie, John
Lewis, Sir Kenneth (Rutland)


Costain, Sir Albert
Lloyd, Peter (Fareham)


Cranborne, Viscount
Loveridge, John


Critchley, Julian
Luce, Richard


Crouch, David
Lyell, Nicholas


Dorrell, Stephen
McCrindle, Robert


Douglas-Hamilton, Lord J.
Macfarlane, Neil


Dover, Denshore
Macmillan, Rt Hon M.


Dunn, Robert (Dartford)
McNair-Wilson, M. (N'bury)


Durant, Tony
McNair-Wilson, P. (New F'st)


Dykes, Hugh
Madel, David


Eden, Rt Hon Sir John
Major, John


Edwards, Rt Hon N. (P'broke)
Marland, Paul


Eggar, Tim
Marlow, Antony


Elliott, Sir William
Marten, Rt Hon Neil


Emery, Sir Peter
Mather, Carol


Eyre, Reginald
Maude, Rt Hon Sir Angus


Faith, Mrs Sheila
Mawhinney, Dr Brian


Farr, John
Maxwell-Hyslop, Robin


Fell, Sir Anthony
Mayhew, Patrick


Fenner, Mrs Peggy
Meyer, Sir Anthony


Finsberg, Geoffrey
Mills, Sir Peter (West Devon)


Fisher, Sir Nigel
Moate, Roger


Fletcher-Cooke, Sir Charles
Montgomery, Fergus


Fookes, Miss Janet
Moore, John


Forman, Nigel
Morris, M. (N'hampton S)


Fowler, Rt Hon Norman
Morrison, Hon C. (Devizes)


Fox, Marcus
Morrison, Hon P. (Chester)


Fraser, Peter (South Angus)
Mudd, David


Fry, Peter
Murphy, Christopher


Gardiner, George (Reigate)
Neale, Gerrard


Glyn, Dr Alan
Needham, Richard


Goodhart, Sir Philip
Nelson, Anthony


Goodhew, Sir Victor
Neubert, Michael


Goodlad, Alastair
Newton, Tony


Gorst, John
Oppenheim, Rt Hon Mrs S.


Gower, Sir Raymond
Page, Richard (SW Herts)


Greenway, Harry
Parkinson, Rt Hon Cecil


Griffiths, E,(B'ySt. Edm'ds)
Parris, Matthew


Griffiths, Peter (Portsm'th N)
Patten, John (Oxford)


Grist, Ian
Pawsey, James





Percival, Sir Ian
Steen, Anthony


Pink, R. Bonner
Stevens, Martin


Pollock, Alexander
Stewart, A.(E Renfrewshire)


Porter, Barry
Stewart, Ian (Hitchin)


Prentice, Rt Hon Reg
Stokes, John


Price, Sir David (Eastleigh)
Tapsell, Peter


Proctor, K. Harvey
Taylor, Teddy (S'end E)


Pym, Rt Hon Francis
Thomas, Rt Hon Peter


Rathbone, Tim
Thompson, Donald


Rees, Peter (Dover and Deal)
Thorne, Neil (Ilord South)


Renton, Tim
Townend, John (Bridlington)


Rhodes James, Robert
Townsend, Cyril D, (B'heath)


Rhys Williams, Sir Brandon
Trippier, David


Ridley, Hon Nicholas
Trotter, Neville


Ridsdale, Sir Julian
van Straubenzee, Sir W.


Rippon, Rt Hon Geoffrey
Viggers, Peter


Roberts, Wyn (Conway)
Wakeham, John


Rossi, Hugh
Waldegrave, Hon William


Sainsbury, Hon Timothy
Walker, B. (Perth)


St. John-Stevas, Rt Hon N.
Walker-Smith, Rt Hon Sir D.


Scott, Nicholas
Waller, Gary


Shaw, Giles (Pudsey)
Walters, Dennis


Shelton, William (Streatham)
Warren, Kenneth


Shepherd, Colin (Hereford)
Wells, Bowen


Shepherd, Richard
Wells, John (Maidstone)


Silvester, Fred
Whitelaw, Rt Hon William


Sims, Roger
Whitney, Raymond


Skeet, T. H. H.
Wickenden, Keith


Smith, Tim (Beaconsfield)
Wiggin, Jerry


Speed, Keith
Williams, D.(Montgomery)


Speller, Tony
Wolfson, Mark


Spicer, Jim (West Dorset)
Young, Sir George (Acton)


Spicer, Michael (S Worcs)



Sproat, Iain
Tellers for the Noes:


Squire, Robin
Mr. Tristan Garel-Jones and


Stanbrook, Ivor
Mr. Ian Lang.


Stanley, John

Question accordingly negatived.

Clause 88 ordered to stand part of the Bill.

Clause 73

PHASING OUT OF APRT

Mr. Straw: I beg to move amendment No. 9, in page 57, line 10, leave out '1st January 1987' and insert '1st January 1988'.

The First Deputy Chairman (Mr. Ernest Armstrong): With this we are taking the following amendments: No. 10, in page 57, line 14, leave out '1st January 1987' and insert '1st January 1988', and No. 11, in page 57, line 24, after '1986', insert 'and 1987'.

Mr. Straw: The Minister understands that I have moved amendment No. 9 to provide us with a vehicle for debate on the Government's proposals. I shall, therefore, use it in that respect.
This is the third debate on oil taxation in which I have participated. It is extraordinary how much change there has been in the Government's attitude towards the taxation of North sea oil in those two years. Two years ago, the Government introduced the supplementary petroleum duty and, with some justification, the oil companies complained that they had been severely clobbered. Last year, the Government withdrew SPD and introduced advance petroleum revenue tax instead. Again the oil companies shrieked at what they said was unjust treatment. This year, the pendulum seems to have swung almost entirely the other way and the Government appear to have given oil companies all that they asked for.
In a four-point package announced in the Budget, the Chancellor described the Government's decisions about


phasing out advance petroleum revenue tax, which is the subject of this amendment. He also announced that there would be PRT release for new oilfields, that the oil allowance would be doubled and that no royalties would be payable for new fields except those onshore and in the profitable southern basin. The cost of those changes is estimated to be £800 million over four years or £200 million this year.
Although there have been three major upheavals in the taxation of the North sea in the past three Budgets, since the Government have come to power there have been 10 sets of major changes.

Dr. J. Dickson Mabon: There have been 11.

Mr. Straw: The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) says that there have been 11. I calculated that there have been nine and the Financial Times said that there had been 10. As the Financial Times is the oracle, I took it at its word.
Irrespective of whether there have been nine, 10 or 11 changes, the Government's performance on this aspect of taxation, as with others, contrasts strangely with their promise. Many of us remember the criticism that the Conservatives, in opposition, made of Labour's oil tax regime. Many hon. Members may remember the statement on energy policy, which the right hon. Member for Bridgwater (Mr. King), then the Conservative energy spokesman, now the Secretary of State for the Environment, made on 10 April 1979. He said:
We are still at the point where by restoring confidence, the North Sea success story could be prolonged into the 1980s.…Confidence has been shattered by frequent changes in the rules and by Labour's hostility to private enterprise… We shall pursue a steady policy designed to secure the fullest advantage to the nation as a whole… We shall therefore review the Government's licensing and tax policies to achieve these benefits".
He said that changes that the Labour Government announced in October 1978 had been
cobbled together in a hurry without consultation as a gimmick for the election from which they shrank in October.
He said that the oil industry
needs a clear assurance that there will not be countless changes in the rules and that there will be full consultation. As a possible means of reducing the uncertainty we shall examine whether a more predictable formula could be incorporated in the tax system to take fuller account of the changes in the real price of oil and in interest rates without the need to introduce further legislation on each occasion.
That was the promise. As I have already said, the performance has been very different. The Government rejected the Institute of Fiscal Studies' proposal for a major reform of the oil taxation regime and they have not at any stage introduced a durable system of taxation which is designed so that they could respond, without major changes in legislation, to fluctuations in the real price of oil and interest rates which, we all accept, can make dramatic differences to the rate of return that is available from the North sea.

Dr. Mabon: Of the 11 changes that the Government have made, five have been substantial. The proof of the pudding is the fact that, from August 1980 until August 1982, no new fields were approved, because the companies would not bring them forward as a result of the penal taxation.

Mr. Straw: I am aware of that. Taxation of the North sea must balance three objectives. First, it must ensure efficiency and continuing exploration and exploitation. Secondly, it must ensure that those who invest in the North sea, be they private or public corporations, are ensured a reasonable rate of return. Thirdly, it must ensure that the Exchequer receives the maximum possible revenue that is consistent with the first two objectives.
It is difficult to secure the right balance between those three objectives. The Opposition do not deny that. The oil companies have not helped themselves because, too often, they have cried wolf at changes, so it has been difficult for others to judge whether they were telling the truth and not over-egging the pudding.
Nevertheless, we must criticise the Government about the way in which they have run North sea oil taxation in the past four years. Their policy has lacked coherence, continuity and judgment about the right balance between the claims of the oil companies, the need to continue exploration and the needs of the Exchequer. That is illustrated by the way in which the pendulum has swung between 1981–82 and this year. Their taxation policy has been in a mess, as has their depletion policy which is something that cannot be left to the market. My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) will discuss that in more detail.
Moreover, the Government have had no strategy for spending revenues from the North sea in a sensible way which provides seedcorn for the future. Revenues from the North sea should have been used to invest in Britain's industry and infrastructure so that when this asset runs out —it will do so in the 1990s—there is a secure industrial base on which Britain's economic future can be built. Instead, more than the £32,620,000 that the Government have received in revenue from the North sea has been squandered on the costs of unemployment. I calculate that it has cost £40,000,000 to have an additional 2 million people whom the Government have thrown on to the dole, out of work. The revenues have been squandered on increasing unemployment.
I should like to ask some detailed questions about the effects of phasing out APRT and the changes in the tax regime that the Government have announced. The first is about the likely outcome with regard to new developments in the North sea. Wood, Mackenzie, whose record in assessing financial returns in the North sea is good, has estimated that the changes in oil taxation are equivalent to an increase of $10 a barrel in the price of oil from the new fields. When one considers that North sea oil is selling at about $30 a barrel and that the likely production costs of some of the new fields will be about $20 a barrel, an additional $10 a barrel will have a dramatic effect on the profitability of those new fields. The Wood, Mackenzie analysis suggests a substantial improvement in cash flow in several illustrative new fields that are described in its bulletin 119. The change in cash flow ranged from 24 per cent., through 45 per cent, and 57 per cent. to 64 per cent. Those are major changes and there has been a corresponding decrease in the Government's revenue from 70 per cent. to about 50 per cent.
However, the Committee will wish to know about the benefit to Britain and to industry of those changes. The Secretary of State for Energy was reported in the Financial Times of 30 March as saying that new developments in the North sea as a result of the Budget changes
will go ahead at the rate of one every six weeks.


The Financial Times energy correspondent said that this view
almost certainly errs on the side of optimism.
The Secretary of State for Energy gets the prize for hyperbole out of all the Ministers, but we should know the likely rate of development in the North sea. Shell has announced that it will develop the Tern field, although it said that it would stop developing the field this time last year. What are the prospects for other fields? Although there has been a rush of announcements recently, how will that development continue?
My second, and related, question is: what will be the impact of the changes on the supply and fabrication industry, which is vital to the economy of Scotland and to the future success of the British Steel Corporation? The fabrication and supply industry has gone through lean times, and the Committee should know that only orders from the British Gas Corporation — a much-maligned nationalised company — through its Rough and Morecambe Bay fields have, according to the Financial Times,
kept the supply and fabrication industry's head above water in the past few months.
However, if large sums of revenue are to be forgone in benefits to the oil companies to encourage exploration of new and marginal fields, we must be assured that the investment by the British public produces a flowback in security of employment and continued orders for that industry. The Minister must inform the Committee about that.
Does the Minister now consider that the present tax regime, after 10 tries, is a settled regime—although the Government may have only two or three months left in office—or are further changes anticipated if there are major changes in oil prices and in world oil supplies? I hope that the Minister will answer those questions.

Mr. David Crouch: I must comment on a word used by the hon. Member for Blackburn (Mr. Straw), which I believed was a slip of the tongue until he used it twice. He spoke about the Government "squandering" money on the unemployed. Was it a slip of the tongue?

Mr. Straw: No.

Mr. Crouch: The hon. Gentleman must agree that that money is not squandered but is spent properly and wisely on those who are in an unfortunate position because of economic problems that are not confined to this country. Although I regret that the amount spent on unemployment must be so much because the numbers are so high, I am proud that we spend that much in the 1980s and not as little as we spent in the 1930s.

Mr. Straw: It was no slip of the tongue. I used the word "squandered" advisedly. This is not the time to have a major debate on economic policy, but the Opposition believe that it would have been far better to run the economy with higher activity and lower unemployment, and to have used North sea oil revenue not to support millions of people out of work but to create work.

Mr. Crouch: I was being generous when I said that I believed that it was a slip of the tongue. I believe that it was a transferred epithet, although I understand the hon. Gentleman's argument.
I must declare an interest in North sea oil. I cannot say that I am a tax adviser—who is a tax adviser? But I advise a small participator in the North sea oil industry, and I have run across the problems of the North sea tax regime for several years. During my speech I may reveal that I do not know as much about the complex problems as my preamble might suggest.
Clause 73 concerns the phasing out of advance petroleum revenue tax. I was glad that the hon. Member for Blackburn said that the amendments were intended to create a debate on the general tax regime in the North sea, and I am grateful to you, Mr. Armstrong, for allowing the debate to proceed on that basis. I hope that you will listen to me carefully to ensure that I do not go too wide of the debate on the phasing out of advance petroleum revenue tax.
My right hon. and learned Friend the Chancellor of the Exchequer said in a press release of 15 March that the proposed changes in the tax regime are designed
to encourage future exploration and appraisal of United Kingdom oil and gas reserves and the development of new fields".
The relief will total £800 million spread over four years, which means that the industry will be relieved of £118 million in the current tax year.
Clause 74—I refer to it only to illustrate points that are relevant to clause 73—contains some exemptions. The Chancellor has said that the oil allowance on petroleum revenue tax will be doubled from 250,000 tonnes to 500,000 tonnes. Such front end relief is most realistic, and we must congratulate the Chancellor on having accepted those figures as a realistic assessment of the problem. That concession will be valuable to North sea operators. Equally, the abolition of royalties will be of enormous value and is another essential relief to the companies developing our production of oil and gas from the North sea. The decision to abolish all royalties payable on future offshore oil and gas fields, other than in the southern region to which it does not apply, will also be valuable.
The advance petroleum revenue tax is an advance payment of tax in the early years of production of a new field. I would have said that it was iniquitous to pay tax in advance, but it replaced supplementary petroleum duty, which was even more iniquitous. I have talked to the Chancellor about this matter— I shall not reveal any confidences — and I know that he did not lose any money on the deal. He did not intend to. The tax will be phased out gradually over four years, and by the end of 1986 it will be abolished completely. In future the costs of exploration and appraisal will be allowed whether or not that expenditure was abortive, which is very valuable.
On the night of the Budget statement the Secretary of State for Energy issued a press statement that praised the changes in the Budget. I am sure that he played some part in making those changes. I am pleased that the Secretary of State for Energy has at long last been heard in the Treasury and that the Chancellor of the Exchequer has taken action on what he said.
The Secretary of State for Energy, in his press statement, said:
The royalty concession, and the other measures announced by the Chancellor, are made after detailed study of the views expressed by the industry about lack of fiscal incentives to encourage development of the smaller more marginal future generation of off-shore fields. I now look for an early and positive response from the licensees concerned.


I am sure that the Secretary of State will get that response. I wish to thank the Chancellor, my hon. Friend the Minister of State and the Secretary of State for Energy for the concessions and for listening to the industry. The benefits enable the industry to keep in business, to explore, appraise and develop oil and gas fields, not just for the industry but for the nation.
7.30 pm
The Chancellor was asked by the industry to make changes in the tax regime to encourage new developments that were simply not taking place, as the hon. Member for Blackburn has said, under the existing tax arrangements. He has made those changes and they will have the desired effect, but they are only just in time. The Secretary of State for Energy will be pleased with the response. It is valuable to discuss the complex subject of North sea taxation and I hope to reveal that I understand a little of it. The Government's present tax take on North sea oil, at least until the Finance Bill is passed, is 89·5 per cent. In simple terms, after allowances—the front end allowances are more generous than they were—the net return to the oil companies is 10·5 per cent. The proposed changes mean that the Government will be taking 1·5 per cent. less—88 per cent. — leaving the oil companies with 12 per cent. That does not seem as though the Government have been generous. The important factor is that the relief has been given at the front end—the oil allowance has been doubled — and that exploration and appraisal costs in new fields may be offset against profits chargeable to petroleum revenue tax. That concession is sensible, realistic and much appreciated by the participators and operators in the North sea.
I could stop there and hon. Members could have an early night. I should say thank you. No matter how I am regarded by the Government Front Bench, I will not stop at that point. The Minister gave me a dark look, but, like Oliver Twist, I would argue, not just ask, for more from the Chancellor. The Social Democratic party sometimes does that, but I am not thinking of following suit. I ask as a result of my own studies. There is no ethical logic in restricting these benefits — for which I thank the Government—to new fields where companies are not already committed. Surely the benefits should be extended to fields under development but not yet on stream.
Why could not the Government have extended the benefits to those fields that are about to produce oil? Unfortunately, they are exempt. Those fields will suffer from the effect of depressed oil prices. Future developments—I refer to fields that have not yet been developed—will not be on stream until the late 1980s and will, no doubt, enjoy higher oil prices than today. The Government have plenty of time and opportunity between now and then to deal with such an eventuality to their own advantage and to adjust the tax balance accordingly. Clause 73 does not involve just the phasing out of APRT. Behind this tax and clause is the price of oil.
In the Finance Act 1981 the Chancellor introduced a rigorous tax regime for the North sea. He was riding high because oil prices were riding high. In the first half of 1981, as the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) will appreciate, having been a Minister of State responsible for this sphere in another life and in another party, the BNOC market price was $39·25. It is hard to imagine that price today, when oil is $29·50 a barrel. The Chancellor wanted revenue and he spotted

a gold mine in the shape of a North sea oil well. He got his money, as the hon. Member for Blackburn has reminded the House, but we did not get the oil. There was virtually no new development taking place in the North sea, with the exception of Clyde and North Alwyn.

Dr. Mabon: What happened to them?

Mr. Crouch: They were sanctioned last autumn. Oil prices moved in the opposite direction to that which the Government expected. They cannot be blamed for that. That is one of the extraordinary occurrences today in the oil market. The 1981 Act was based on high oil prices. That was the basis of the Government's thinking and their taxation policy. High prices were the basis on which oil fields in the North sea were being developed. The basis was one of continuing high prices. These fields are now coming on stream and some will be coming on stream in the near future, but instead of a price of $39 the price today is $29·50. I argue that such fields and fields under development but not in production should benefit from the doubling of the oil allowance—for which I am grateful —and the abolition of royalties. For some reason they are excluded under clause 74.
If the economic justification is to align current fiscal structure with the present perspective in oil prices, surely the benefits—the reliefs— should be extended to fields about to come into production. Those fields will suffer the effect of depressed oil prices.
Great complexity is involved in these topics. It is not easy to understand the tax regime for North sea oil. The Minister and the Chancellor have shown that they understand the arguments of the industry and of the Department of Energy. Prices have gone a long way, from the $39 at which they started to $29·50 today.
The phasing out of APRT and the other reliefs are welcome. The Government must avoid the risk of the oil companies phasing out their North sea operations. If we are not careful, they might consider doing just that.
Will the Minister bear in mind those simple thoughts, and consider the possibility of extending the reliefs backwards?

Mr. J. Grimond: As the terminals at Flotta and Sullom Voe are in my constituency, the taxation of oil is of considerable importance to my constituency and to the country. The taxation of oil revenues is a highly complicated subject and, as with the rest of our taxation, it is not becoming less complicated. In addition, in many ways the activities of Governments are contradictory. It is only recently that a development grant of £61 million has been made to the consortium at Sullom Voe, at the same time as it is being taxed at almost 89 per cent. No Member of Parliament would complain about a development grant being made to his constituency, but, on the face of it, it is rather a curious contradiction.
I am afraid that that is rather typical of the way in which we run our affairs. As the hon. Member for Canterbury (Mr. Crouch) and my right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) have pointed out, recent taxation has virtually put a stop to exploration in the North sea. In the fairly recent past, the rates of taxation have been altered about 11 times, thus making it extremely difficult for oil companies to plan ahead and causing considerable anxiety to those who are dependent on the industry. I welcome the fact that, as I understand it, these changes will greatly assist the smaller fields and


encourage new exploration. I take the point made by the hon. Member for Canterbury, that, although they will encourage new exploration, the fields that have not yet come on stream will not gain, and may be faced with a difficult oil price when they begin to produce. There is strength in the hon. Gentleman's argument and it should be considered.
Naturally I am particularly concerned about the fields that feed directly into Sullom and Flotta. There has been some speculation about the future of Occidental Oil, which is engaged in very large operations in America and which, I understand, is running up a considerable debt. I imagine that these changes will not be so important in the fields that feed into Sullom Voe. Perhaps the Minister can give us a breakdown of the effect of the changes on the different North sea fields and can tell us of the effect on the new exploration round the Claymore field and to the west of Shetland. Obviously they will benefit the whole industry. We are grateful for that and hope that exploration will start up again.
Of course, oil is important to Great Britain, and the economy of Orkney and Shetland is now deeply affected by it. It would greatly help if the Government could give us some intimation of their expectations. I can hardly believe that the very optimistic forecasts that have been referred to in the Financial Times have any very solid foundation. Was it said that one new field would be opened up every six weeks? Surely that is optimistic. However, it would help if the Government said something about that. Some stability of outlook would also be of great advantage. May we take it that the Government — as long as they are still in office—will continue along the path that they have taken and that, as far as possible, there will not be any abrupt changes in the taxation of oil, although I appreciate that some may be necessary, due to the changing price of the economy? In general, the proposals are to be welcomed, especially by my constituency. I should imagine that they will be welcomed by the whole country, and certainly by the industry itself.

Dr. Mabon: I wholeheartedly agree with what my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) has said about welcome proposals. We are talking about 11 changes. In all fairness, the Government have met more than half of the requests made by the industry. Admittedly, it is a last-minute repentance. Indeed, they have inhibited the development of the North sea in the past two or three years. My right hon. Friend mentioned the suggestion that every six weeks there would be a new field. That means, at the very best, that there would be an agreement by the Minister—what is called the annex B sanction — every six or eight weeks. I would be very surprised if that were bureaucratically possible. Nevertheless, I accept that we are talking about smaller fields than we approved in the early 1970s.
The hon. Member for Canterbury (Mr. Crouch) is very loyal to his Government; indeed, excessively loyal at times. On the other hand, he can be extremely bold in his candour about them. The Government have failed several times to deal with oil taxation. However, on this occasion, I agree that they have done very well in the Bill. I certainly would not criticise the provisions. We are told that the amendment is to act as a peg. It will not involve voting,

but offers a means to talk about petroleum revenue tax. I hope that the Government will consider petroleum revenue tax and the possibility of a fall in the oil price.
The hon. Member for Canterbury spoke about oil prices falling from $39 to $29·50 a barrel. That 50 cents is important. If Nigeria has difficulty with its oil sales, the chairman of BNOC has warned us that we might have an oil crisis, even over 50 cents. In that case, the Government would have to admit fairly quickly that, although PRT has not changed, they would have to respond to a drop in oil prices. Fortunately, no Government have had to face up to that yet. They have always had to deal with rising oil prices, and therefore with companies making a lot of money. However, falling oil prices would have a substantial effect on companies. I hope that the Minister will tell us that he has not given in on the basic rate of PRT, but that he will keep a careful eye on it if the oil price drops.
The Government have not given an inch over the taxation of the smaller fields. I refer to the fields mentioned by the right hon. Member for Orkney and Shetland, which we shall develop in the next 10 years. They will be tiny compared with the splendid Brent and the Forties fields. There will be smaller fields of less than 100 million barrels. Therefore, we should tax them less. The industry must find out how to get the oil out more cheaply. That is a problem, not for the Government but for it. However, the Government have a serious problem in deciding how to tax the smaller fields in a way that will produce the yield in volume of oil and also revenue. After all, there is a possibility that the North sea oil province will become very unattractive to overseas investors.
I am sorry about the concluding remarks of the hon. Member for Canterbury. The Government have given inspiration to the industry, not so much by what they have done arithmetically in the concessions, but by giving the impression that, despite what they said in opposition, they are not willing to tax the oil industry for ever and ever, amen. They now realise that they have gone too far. The hon. Member for Canterbury talks about the eleventh hour—or perhaps it is the twelfth hour. The Government have just managed to stop the fall-off in North sea development. We have just managed to stop the spread of international opinion that the North sea oil province is not worth investing in, because taxation is too onerous and there are other attractive provinces elsewhere. I give the Government credit for that. For two years they have been sinful, but the fact that they have been converted to Christianity at the eleventh hour is a blessing, and we should rejoice in that. I agree that what they are doing is quite sensible. However, the Government should consider further not only the price of oil—which I hope will not change — but the so-called marginal fields. The oil industry expects them to look closely at that.
We often forget that the gas fields in the shallower seas, particularly in the Southern North sea, are possibly at risk if we do not look more closely at the structure of taxation. It is proper and correct that we, the elected representatives of the people, should demand a proper return to the people from the development of these resources. At the same time, we cannot, by our insistence, and against ourselves, impose taxation that is too high. That is just silly. The Government have awakened to the fact at last. They have made a great advance in the Bill but there is a little more still to do.

Mr. Tim Eggar: Oil companies are not the most popular group in the House, on either side of the Committee, and it is a demonstration that the Government have the right answer in the Bill that there has been no criticism from any hon. Member about the fact that the Government have seen it right to give some £800 million back to the industry over four years. The silence and the lack of criticism constitute praise of the Government and a recognition of the strength of the industry's case. They are also recognition of the major role that the industry is now playing within our economy.
I remember that the Chancellor in his Budget speech tried effectively to put the North sea and the contribution of the oil revenues into the context of the overall economy. We should not forget that about 200,000 people are employed directly in the North sea, either by the oil companies or by the oil supply companies. Many hundreds of thousands of people are employed in the companies that make the hardware that goes into new developments. We should not forget that the oil industry has a fine reputation for ordering from United Kingdom companies. I recognise that the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) had something to do with level of ordering from the United Kingdom, as did my hon. Friend the Minister. None the less, the oil industry has played the game as regards ordering from the United Kingdom
I give an unreserved welcome to the changes. Over the past two years I have never made any secret of the fact that I have been extremely unhappy with the level of taxation on oil companies, particularly those oil companies faced with developing new and marginal fields. I admire the way in which the hon. Member for Blackburn (Mr. Straw) presented what was undoubtedly a rather difficult case, because he could not be seen to be overtly supporting the oil companies but he had to acknowledge the logic of the Government's case. I rather regret that when we went through the same arguments this time last year in Committee the hon. Gentleman did not feel able to support the various amendments that I moved, arguing for a reduction in oil taxations.

Mr. Straw: I did not feel able to support the hon. Gentleman's amendments, but we were concerned about the effect of APRT upon the cash flow of oil companies. There was a dispute between ourselves and the Government about who was right. It has turned out—and one result is the changes announced today—that the APRT has had a more adverse effect on the companies' cash flow than the Government expected this time last year.

Mr. Eggar: I accept that point, but the fall in the real oil price has also had an effect.
The package announced by the Chancellor was particularly well designed. The hon. Member for Blackburn made this point well by quoting the increase in the rates of return that Wood, Mackenzie drew on the new marginal fields. It quoted those returns by way of saying that the Government had gone too far. That the increases are so significant in the marginal fields shows how effective the Government have been in zeroing in on the fields that need assistance and making sure that the tax concessions go to those fields. The industry has recognised that. My hon. Friend the Member for Canterbury (Mr. Crouch) was being a little less than fair to the Government

about fields that are under development and in production. Those fields, in so far as they are paying APRT, will benefit from the phasing out of APRT payments.
In addition to the way in which the Government have been able to zero in on marginal fields, the industry has particularly welcomed the simplification of the tax system in the changes. By 1987, instead of this crazy system of four different levels of tax, with each different level reacting in a curious way to the level above, or below, there will be two levels of taxation — PRT and corporation tax. That will make the life of hon. Members much easier, even if it might reduce the bills and fees of the oil taxation lawyers who have been growing fat on giving advice to the oil industry.
Other hon. Members have asked how many fields will result from these concessions. About five or six fields have already been announced, and a number of other plans have been dusted off. The old drilling results are being looked up and the teams are being put together again. Progress is being made and I understand from the industry that over the next few weeks and months we shall see a new annex B submission.
The right hon. Member for Greenock and Port Glasgow referred to the problem of the length of time, administratively, that annex B took to assess, but he is rather out of date. My right hon. Friend the Secretary of State for Energy has introduced a new system, which one could roughly call the rolling annex B submission. That means that the awful fandango that everybody had to go through to get everything ready then slap it into the Department of Energy, with all the delays that ensued, and the strains that that placed on the officials in the Department are no longer necessary, because the annex B submission can be phased. I am sorry that the right hon. Member for Greenock and Port Glasgow is not willing to be at least as generous to my right hon. Friend over this reform as he was to my hon. Friend for the general tenor of the tax changes.

Dr. Mabon: I admit the criticism of myself as old-fashioned and wrong, and agree that the Department has become enormously modern and is able to process annex Bs at the rate of one every six weeks. Is the hon. Gentleman telling us that the new system will give us one annex B every six weeks? I am asking him to give a hostage to fortune.

Mr. Eggar: I would not have given that assurance anyway, but certainly not after the right hon. Gentleman's last words. The point is that under the old system the annex B had to be submitted as a whole. Now it can be submitted section by section, and that makes the work load on the oil companies and the Department that much easier. They are not suddenly faced with the whole thing, with a famine followed by a feast of paper, and then another famine and so on. That is a welcome reform, which I am sorry the right hon. Gentleman does not feel able to accept. I have one final technical point that I should like the Minister to clarify, if not now perhaps later. He will recollect that last year, as a result of an amendment introduced in Committee, it was agreed that APRT that had not been offset against PRT within five years of the first payment of APRT would be refunded after those five years.
It is rather curious that if APRT has not been offset against PRT payments by the end of 1986 no refund is due to the companies from the Government. If my


understanding of clause 73 is correct, I do not understand the logic of that. Logically, the APRT should still be refunded. It may be that the Inland Revenue believes that no APRT would be refundable because of the phasing out. I would be grateful if my hon. Friend will confirm whether that is the case.
Finally, may I pay tribute to my hon. Friend for the way in which he has handled this extremely complex matter. He has involved himself in detailed discussions with the industry and, although I have no interest to declare, I know that the industry is extremely grateful for the open way in which he has approached the problem. While his proposals do not meet all the industry's wishes, they are as much as it could reasonably expect.

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The Minister of State, Treasury (Mr. John Wakeham): This has been a short but good debate—good for the Government because everybody has basically welcomed what we are seeking to do, and good for the Opposition because the hon. Member for Blackburn (Mr. Straw) did not reveal too much of what the Opposition might do were they to take office. When the Opposition amendment was first tabled I considered it carefully to discover their strategy. Perhaps I should not have been surprised when I could not find it. The hon. Gentleman admitted that the amendment's purpose was to obtain a debate and to that extent he has succeeded.
In the course of his speech — some of which was reminiscent of his speech last year, about certain changes in the tax arrangements for the oil industry, irrespective of whether they were what the industry wanted — the hon. Gentleman chided the Government for a volte face but admitted that we were in a difficult area in which it was difficult to get the balance right. I hope in the course of my remarks to be able to deal with the charge that there has been a complete volte face, because that is not so. APRT and its predecessor SPD were specifically designed to reduce the too generous front-end loading in the then oil tax regime as against the Government's need to reduce their borrowing generally following the substantial increase in oil prices in 1978–79.
However, the position has changed. The priority must now be to provide the right fiscal environment for the development of a new generation of smaller fields against the considerable uncertainty of future oil prices. APRT will continue to play its part for a period, but the time has now come to start phasing it out for existing fields. It will have disappeared by the time future fields come on stream.

Dr. Mabon: APRT was a Tory tax. It was never postulated by the Opposition in 1978 — to which the hon. Gentleman has referred—and 1979. Why did the Government introduce it? Was not that wrong?

Mr. Wakeham: Certainly not. It was necessary at that time because there were considerable economic difficulties. It was a time of massive increases in oil prices and generous front-end loading on the first generation of fields. It was right that a tax of that sort should have been introduced. I know that the right hon. Gentleman speaks eloquently for the oil industry, but I suspect that if he had been in government he might have taken a slightly different view. That is something we can speculate about.
When we debated oil taxation in the House a year ago, many hon. Members expressed anxiety about the position of smaller, marginal fields under the fiscal regime. The industry was making representations on that and other points, so the Chancellor agreed that there should be continuing discussions with the industry about future field profitability. As I said on Report:
I hope that in the forthcoming discussions with UKOOA about the tax regime companies will feel able to support their arguments with chapter and verse about individual projects." —[Official Report, 13 July 1982; Vol. 27, c. 981.]
The point that I was making was that we wanted to use the best and most reliable data available in the profitability analysis which was central to the way that we go about reviewing the North sea fiscal regime. There was, perhaps, a natural reluctance on the part of companies to divulge commercially sensitive information about future possible projects and in previous reviews we have had to rely primarily on data for hypothetical future fields. While that can be useful, it is always difficult to tell how representative of prospects the models will be.
In the review leading up to the Budget we were determined, if at all possible, to base our analysis on actual future projects. We sought that information from the operators and I am pleased to say that we had their fullest co-operation. We also had extensive and helpful consultations with UKOOA, both in relation to its study of profitability and representations about tax.
The results of that survey showed that the level of profitability of existing fields was generally satisfactory and, viewed in isolation, the results did not suggest that fiscal reductions were required for existing fields. On our middle market price assumptions, the average pre-Budget return for the future incremental projects was an attractive 22·8 per cent. The 10 free-standing future fields were split into two groups — five more profitable, five less profitable—with average pre-Budget returns of 13 and 8·7 per cent. respectively. Those returns were significantly less than those that we found on average for existing fields and prospective incremental projects.
The finding that future free-standing fields are likely in general to be less profitable than hitherto reflects the fact that they are likely to be smaller, geologically more complicated, and proportionately more costly to develop than previous fields. The industry shares that conclusion. Indeed, because of the work done by both sides this year, Government and industry are closer together in their understanding of the future profitability of the North sea than ever before.
Therefore, we thought it right to target relief selectively and cost-effectively to benefit future free-standing fields, as my hon. Friend the Member for Enfield, North (Mr. Eggar) pointed out. That is consistent with our twin objectives of encouraging future exploration, appraisal and development in the North sea, while at the same time securing the maximum benefit for the nation. If there are those who feel that even the projected rates of return sound relatively high, I remind them that the risks that the companies are running, and the uncertainties about price, production and costs, are considerable. The returns need to recognise that.
The Budget changes improve post-tax returns for future free-standing fields by around five percentage points. Post-budget, and on middle oil price assumptions, the average post-tax return for the five more profitable fields was 18·2 per cent., and for the five less profitable, 13·7


per cent. Those were some of the figures that the hon. Member for Blackburn sought. Where companies are able to get immediate corporation tax relief for expenditure on such fields that may add a further six percentage points to the post-tax rate of return.
My hon. Friend the Member for Canterbury (Mr. Crouch) was supportive of the Government in the main. He referred to the rates of tax on the oilfields. He quoted the marginal rate of tax at the top end, which is by no means the average rate of tax. My hon. Friend rightly pointed out that the cut in the marginal rate was from 89·5 per cent. to 88 per cent. The new fields benefit much more from the extra oil allowance. The average rate of tax is down from about 70 per cent. to about 60 per cent.

Dr. Mabon: In fairness to the hon. Member for Canterbury (Mr. Crouch), the Minister has the audacity to talk about a reduction in corporation tax. It is conceivable that a marginal field would reach the stage of not paying PRT at all and could be developed only if it were below the level at which it would be liable for corporation tax. There is no provision to allow a marginal field to be below that level, which is what the Minister critically implied.

Mr. Wakeham: I was not criticising my hon. Friend. I was trying to widen his remark, which I thought was a touch selective, about the returns from fields. What my hon. Friend said was correct, but it was not the whole picture. The average rate was more indicative of returns than the highest of the marginal rates.
The two reliefs targeted towards future free-standing fields are the abolition of royalties and the doubling of the PRT oil allowance. I do not propose to say very much about these measures now because we shall have an opportunity to debate the separate royalty Bill shortly and the double oil allowance later in Committee. But, taken together with the clause we are now considering, which ensures that future fields will pay no APRT, the measures will significantly relax and simplify the fiscal regime for future free-standing fields. The taxes they pay will be entirely profit-related— just PRT and corporation tax. That is an important point.
The right hon. Member for Greenock and Port Glasgow (Dr. Mabon), in his generous remarks, criticised the fact that we have not helped small fields to the same extent. That is pricisely what the abolition of royalties and oil allowances does. Fields below 1 million tonnes production a year will pay nothing but the normal corporation tax, which all companies pay. That is substantial help for those fields. The average rate of tax over field life as a whole on the future fields we examined will be reduced from more than 70 per cent. to around 60 per cent.
Another important element in the Budget package is the new PRT relief for post-Budget expenditure on exploration and appraisal outside existing fields. Again there will be an opportunity to consider this in detail later. Suffice it to say that the Exchequer will provide rapid tax relief worth up to 75p in the pound for expenditure on the essential acitivity of finding and providing the commerciality of new oil reserves.
8.15 pm
The purpose of clause 73 and schedule 11 is to phase out advance petroleum revenue tax by the end of 1986. This will be achieved by progressively reducing the rate from its present 20 per cent. to five per cent. in 1986,

whereafter it will be abolished altogether. The 1983–84 cost is estimated to be £50 million and the average annual cost over the next four years is put at £165 million.
As its name suggests, advance petroleum revenue tax brings forward into earlier years tax that would he paid later as petroleum revenue tax. It was introduced to continue acceleration of receipts when, in response to the industry's representations, supplementary petroleum duty was abolished in last year's Finance Act from the beginning of 1983. After the 1979–80 oil price rise it was reasonable for the Government to advance some of their receipts into the early years of production from the larger first generation fields.
The industry has been unanimous in seeking the early phasing out of APRT, which it dislikes because it was calculated by reference to revenues, not profits, and reduced cash flow early in a field's life. We believe that APRT remains justified for the first generation fields, which remain generally very profitable, but we accept that, on the basis of our analysis of future fields, it should not apply to the new generation of future fields. We also accept that, although existing fields are generally profitable, there is a case for some boost to companies' more immediate cash flow to encourage reinvestment in the North sea. The phasing out of APRT over four years meets both those objectives.
Taking the changes together, we believe that the Government have made an important move to safeguard the future rate of development. I would hesitate before attempting to put a figure on how much extra development will take place as a result of the changes. There are many other factors besides tax. But I do know that the Department of Energy is already discussing with companies four oil and gas condensate fields and four southern basin gasfields. The Department believes that another five oil or condensate fields and another four gasfields are likely to come up for discussion in the next two years. As the right hon. Member for Orkney and Shetland (Mr. Grimond) pointed out, that is another 17 developments. That represents one new development about every six weeks over the next two years. This is a substantial amount of activity. Exploration and appraisal drilling was already last year, before the Budget measures, at levels only just below the previous record of 1975. This represents a substantial number of jobs. Again it would be rash of me to comment on the precise estimates of the number of jobs involved which have been made from time to time. But once the new developments have got under way, they should provide a valuable boost to the offshore supplies industry, with nearly 75 per cent. of orders currently going to British yards and factories.
The Opposition complained last year, and this year, that the system was too complicated and that it changed too often. They seemed sympathetic to the idea of another radical review, and to the possibility of a totally new system, perhaps on the lines of the proposal of the Institute of Fiscal Studies. I recognise that it has not been possible in the past two or three years to provide the stability in the fiscal regime which in principle may be desirable. But the changes have been made necessary, first, by the need to meet massive changes in the outside environment following the 1979–80 price rise; secondly, by the Government's willingness to modify the regime to meet the industry's criticisms as far as is compatible with the


need for a fair Government share of the take; and, thirdly, by improving information about the next phase of development in the North sea.

Mr. Crouch: May I remind my hon. Friend of the gentle criticism I made about what is a relevant new field. I am grateful for the concessions that help the marginal fields but I was talking about those developers who have taken the risk and started to develop under the old tax regime. They will not be entitled to the concessions under clause 74, which is unfortunate. I have never understood why the Treasury and my right hon. and learned Friend the Chancellor did not recognise that those who took the risk under the old regime should enjoy similar benefits to those who take risks now, which are lesser risks.

Mr. Wakeham: We still considered the existing fields to be reasonably profitable after our review, but we were concerned about the marginal new fields, many of which were smaller than the established fields. That is why we have made the distinction between future fields and existing fields. I remind my hon. Friend that the phasing out of APRT will benefit existing fields — the fields about which he is concerned—as well as new fields. The existing fields will enjoy some benefit in improved cash flow. As its title suggests, APRT is an advance of tax, and at the end of the day the companies will "hope" to pay PRT because their projects have been successful.

Dr. Mabon: I understand the difficulty of drawing a line, but why have the Government chosen 1 April 1982? I realise that if the Government moved back one year there would be complaints and assertions that they should have moved back two years. However, what is the intellectual justification for drawing the line at 1982 rather than at 1981?

Mr. Wakeham: There are two justifications. First, 1 April 1982 was about the time when we started to have detailed discussions with the industry about future fields. It seemed a reasonable point at which to start. Secondly — perhaps this is more controversial — there was something of a gap between first generation and second generation fields, and it seemed that 1 April 1982 was about the right time to draw the line. It was the time when we started seriously to investigate the changed circumstances that were becoming apparent for marginal fields in future.
It has been suggested that the oil companies cannot rely upon this year's reliefs because they will be taken away before they are of any help to the companies—in other words, a further reflection to the companies, to repeat the charge of the hon. Member for Blackburn, of the changing situation. I recognise that no Government can constitutionally bind their successors or themselves, but there is a common interest between the Government and the industry in future successful North sea oil developments, and history has shown that changes have not produced profits of unacceptable levels from existing fields. Our figures show, however, that existing fields are still very profitable, and the phasing out of APRT is a sign that we are ready to help such fields to the extent that is necessary.
Our carefully balanced package, coupled with the full discussions that we have had with the industry, should give the companies confidence in our future intentions. With

companies such as Shell, BP, Texaco, Philips, and Esso reported to be reassessing development plans for the North sea, it is clear that our Budget strategy represents an excellent basis for encouraging future investment.

Mr. John Smith: It is some time since I participated in debates on this subject. I remember the days of 1974–76 when the then Conservative Opposition were complaining about the taxation structure proposed by the then Labour Government, which in retrospect seems moderate. It was claimed the the Labour Government would over-tax North sea developments and drive oil companies from our waters. One develops an acute sense of irony in the House of Commons, but I feel that I have been restrained during the past two or three years, during which the Government have moved in to take a much larger share of profits from the North sea than the Conservative party had ever contemplated. We have seen that happen, in a reversal of Government policy. It is slightly odd for Ministers to take credit for removing burdens which they themselves imposed.
Since the Government took office in 1979, they have been the beneficiaries of the most fantastic bonus that any Government in our history have received. The Labour Government received revenues of about £800 million in 1978 and 1979, the two years when they first became available. This Government have received over £20 billion from North sea revenues. They have received about £20 billion more than their predecessors, £20 billion more than they would have had if the United Kingdom had not been the beneficiary of oil and gas revenues.
What have the Government done with the £20 billion? They have spent it all on paying for the extra unemployment that they have created. The cost to the Government of an unemployed person is about £6,000 a year. If the Government are responsible for creating only another 2 million unemployed, they have incurred the responsibility of finding another £12 billion a year. However, North sea oil revenues are running at about £8 billion a year. The total of North sea oil revenues does not equal the cost of the extra unemployment that the Government's economic policies have created.
When I had ministerial responsibilities in 1975–76, I often reflected on the use to which North sea revenues would be put. The Labour Government knew that they would be high, but they did not know that they would be as high as they have proved to be. However, we knew that they would constitute a windfall for whichever Government happened to be the beneficiary. I thought that if the beneficiary were a Government of the Left the revenue would be spent on social projects, Government pump-priming, and support for industry and social services. I thought that if it were a Government of the Right the revenue would be handed back in tax cuts and tax concessions. I thought that it might be argued by them that the latter course would be a better way of using the revenue because it would allow a series of individual and personal economic decisions to be made, rather than Government decisions.
I do not think that anyone ever dreamed—if anyone had done so and recounted the dream, he would have been treated as mad—that a Government would say, "We will not spend the revenue through the state and we will not spend it through individual choices or tax cuts. We will spend it on funding the extra unemployment that we shall manage to create at the same time as we receive the


revenue." When the history of this country comes to be written, the public will wonder how it was possible for a Government to contrive to misspend the largest windfall the country had ever had.
The question which must insistently be put to the Government in the weeks or months that lie ahead is what happened to the £20 billion, what is happening to the £8 billion and what will happen to the money if they are returned at the next election? Not only are they misusing the revenues on a scale we never thought possible; they are pumping oil out of the North sea for all they are worth, far more than the nation needs, to try to satisfy the Government's addiction for North sea oil revenues. Because they have an enormous army of unemployed whom they must pay, they must pump the oil out as fast as possible, to maximise their revenues, and, at over 103 million tonnes a year, we now have the highest production ever.
We are exporting 60 per cent. of North sea oil. As we import 30 per cent., our net exports are 30 per cent., which is far more than we need to achieve. We are doing that exporting in an era of some uncertainty about oil prices, when there is not exactly a shortage of oil. It is being pumped out at such a rate that it will leave us with a sharp gap between supply and demand in only a few years. The Government must drain the oil out and squeeze the revenue out for all they are worth so that they get the maximum advantage, denying it to their successors and future generations.
8.30 pm
Any sensible depletion policy tries to match supply and demand for as long as possible. The Government are just raiding the funds of the country, misspending them in a tremendously stupid way and denying future generations the benefits of revenues which, if properly garnered, could be of enormous economic benefit to the nation. That is a staggering indictment of the Government.
Apart from that, the Government have managed the development of the North sea foolishly. The North sea oil industries have had to go from famine to feast, staggering from a surplus of orders at one stage to a terrible scramble for orders at the next. The latter has been the situation for some time; whenever there is a platform order, the companies scramble for the work. Instead of organising matters to achieve sustained development over the years, we have seen a crisis in the North sea, and that has happened in the last three or four years as a result of Government policy. Now, however, they say, "It will be all right. We have changed our policy and instead of having only a few fields coming forward, as has been the case in recent years, we have 17 coming forward."

Dr. Mabon: One every six weeks.

Mr. Smith: Yes, if one cares to believe that. The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) expresses the scepticism that is felt in all parts of the Committee. Nobody in his right mind believes that a new oilfield will be developed every six weeks. Indeed, it is amazing that the Minister should have been prepared to offer it, but there is no obligation on us to believe it, and anybody connected with the North sea must take the same view. Instead of getting sustained development we are back to the rush for orders, although certainly we need the work and the employment it will provide. That is one

reason why we on these Benches do not in principle oppose these taxation changes. After all, most of the taxes were imposed by the Government, particularly APRT.

Mr. Eggar: Really!

Mr. Smith: I do not see why that should cause any dissatisfaction to the hon. Member. Just because the Government stop behaving foolishly in one respect does not mean that they should be showered with congratulations.

Mr. Eggar: In Standing Committee last year I moved a series of amendments which it would have been possible for the right hon. Gentleman to support, but all Opposition spokesmen did was sit on the fence; they were not prepared to come down on one side or the other. Why is he now uttering such strong words? Why did we not have strong action last year?

Mr. Smith: I did not have the benefit of knowing that, but it occurs to me that the hon. Gentleman might not have attracted support because he did not argue his case persuasively or successfully. That is usually why people do not get support. We are now -asked to shower the Government with compliments because they have changed their mind, and that is ridiculous in this instance.
A balance must be struck between what is the appropriate take for the nation and what should be left to the companies in the North sea. Every Government must think about that balance with great care. If they leave too much money in the pockets of the companies, that places an additional burden on the taxpayer. On the other hand, the Government could, if they overdid their taxation policies, bring development in the North sea and the supporting industries to a halt, or at least present them with extreme difficulty. That becomes most acute for the small marginal fields which are extremely expensive to develop. The taxation policy that should be shaped is one that brings forward development and therefore creates the revenues, but does not give absurdly generous incentives that turn out not to be beneficial to the taxpayer.
The Minister referred to royalties. We will have a debate shortly on the Petroleum Royalties (Relief) Bill. It has to be taken into the picture. It cannot be approached in this manner. I am far from convinced that it is appropriate at this stage to say that there will be no royalties whatsoever for any new finds in the North sea except for the southern basin. There would be a case for —it has always been recognised that there is a case—and there is in the existing legislation a possibility of, remitting royalties in appropriate cases where the company can show that it is necessary for the development of the field not to pay the royalty. Why should we say that in all cases, in all fields in the North sea, there will be no royalties at all?
That is another lurch of Government policy. It is lurching wildly in one direction, having lurched wildly in the other. I give notice to the Government that we shall probe them carefully on that point when we discuss the Petroleum Royalties (Relief) Bill. We shall expect them to make a convincing case, which has not yet been done, why there should be such a sweeping change in North sea oil taxation.
If nothing else, this short debate has allowed us to ventilate some of these subjects. We shall return to them in the Committee on the Petroleum Royalties (Relief) Bill.


If the Government want to get it through, the way things are going, they had better move smartly. We shall be happy to debate it as soon as possible. With the thought that we are not leaving this subject for ever, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 ordered to stand part of the Bill.

Schedule 11

APRT: MODIFICATIONS OF FINANCE ACT 1982, SCHEDULE 19

Mr. Wakeham: I beg to move amendment No. 12, in page 140, line 16, leave out 'after 1st January 1985' and insert
'on or after 31st December 1984'.
This amendment corrects a drafting error.

Amendment agreed to.

Schedule 11, as amended, agreed to.

Bill (Clauses 12, 16, 63, 73 and 88; and Schedule 11), reported, with an amendment; to lie upon the Table.

European Social Fund

The Minister of State, Department of Employment (Mr. Michael Alison): I beg to move,
That this House takes note of European Community Document No. 10235/82 comprising a Commission opinion and implementing measures for the review of the European Social Fund, and the Explanatory Memoranda dated 23rd November 1982, and 26th April 1983, and of European Community Document No. 10657/82 setting out proposals and guidelines for the development of training policies and the Explanatory Memoranda dated 9th December 1982 and 26th April 1983; and welcomes the Government's intention to seek agreement on the basis of these Commission proposals to use the Social Fund to help resolve the labour market problems of the Community more effectively than hitherto, and to ensure that its training policies continue to develop to match the best practice in the Community.
I should like to begin by saying how much the Government welcome the opportunity to debate these two important European Community documents. Taken together, the documents will play a key role in the shaping of the Community's vocational training policies in the 1980s and the development of the main Community financial instrument in the training and employment field —the European social fund.
The debate is particularly welcome because it provides an opportunity to refute the arguments of those who harp on the negative aspects of the United Kingdom's membership of the European Community. The documents show that the Community, and in particular the European Commission, recognise to a substantial degree the priorities that the United Kingdom has already adopted on training and employment matters. The task that we now jointly face is to build on this favourable start.
The European social fund provides assistance towards schemes of training, job creation and the geographical mobility of workers. The fund has made a considerable contribution to the training and employment effort in this country. Since our accession to the Community in 1973, the United Kingdom has received allocations from the fund amounting to more than £960 million. In 1981, our allocations came to some £141 million, and in 1982 to no less than £258 million. Those allocations represented some 25 per cent. and 30 per cent. respectively of the total fund budget.
No less important than the financial benefits are the stimulus and encouragement which fund assistance provides towards our various training and employment schemes. For example, there has been sizeable fund support for the disabled and for the training and recruitment of adults, particularly in regions of high unemployment. Even more significant and welcome has been the very substantial support given by the fund to schemes for young people, which totalled some £160 million in 1982. This is further evidence that the fund has a proper sense of priorities. As my right hon. Friend the Secretary of State for Employment said when announcing our plans for the youth training scheme last June, we assumed substantial assistance from the fund in deciding the resources required, and that is an essential aspect of the youth training scheme.
As might be expected, the bulk of fund support in this country has gone in respect of schemes operated by the Manpower Services Commission and the Department of Manpower Services in Northern Ireland. But the Government are delighted that there has also been


substantial fund support for a wide range of other bodies, including private firms, voluntary bodies and local authorities. This support has grown rapidly over the last two years, and offers a convincing demonstration of the general benefits of membership of the Community.
The total size of the fund has greatly increased in recent years, and the Government, welcome the efforts in this direction of the European Commission, not least the Commissioner for Social Affairs, Mr. Ivor Richard. Yet the fund still represents only 8 per cent. of the total Community budget, while unemployment continues to rise throughout the Community and the demand for fund assistance now outstrips its resources by more than 100 per cent. This situtation provides further vindication—if any were necessary —of of the Government's firm view that there should be a shift in Community spending away from agriculture and towards activities meeting other needs of high priority such as are covered by the regional and social funds.
I have described the operation of the fund in order to emphasise the importance of the proposals before us tonight. The Council of Ministers is required to review the fund every five years, so as to enable it to tackle the most important current labour market problems within the Community.
In approaching this quinquennial review, the Government have been acutely aware of the background of high unemployment throughout the Community and of the resources at the fund's disposal which are, alas, limited. The task therefore is to maximise the impact of the fund by concentrating its resources on the problems and areas where they can do the most good.
First and foremost, the fund must contribute to tackling unemployment among young people, in particular by helping to equip them with the training and work experience which will enable them to find and keep secure jobs. Successive Councils of Ministers have highlighted youth unemployment as a problem to which the Community must give high priority, and the social fund clearly has a central role in this respect.
In addition, and of great importance, the fund should recognise the major shifts in the incidence of unemployment that have occurred in the Community over the last few years. Unemployment has become particularly acute in those areas which are affected by the continuing decline in labour-intensive traditional manufacturing and commercial activities. The Government firmly believe that such areas of high unemployment deserve greater emphasis in the allocations of the fund's resources, particularly as compared with peripheral and underdeveloped rural regions of the Community which currently receive very favourable special status under the fund. In our view, the Community still has some way to go before it gives adequate recognition to the urban and industrial problems which are increasingly affecting a number of member states.
There are, of course, other important issues at stake. The Government believe that the major task of the fund should continue to be support for training, which represents a lasting investment in individuals and is crucial to the development of a skilled work force for the future. There is certainly a role for the fund in direct employment creation, but—given its limited resources—it needs to focus such support on groups and activities which are at a special disadvantage in the labour market, particularly young people and the long-term unemployed. The review

also provides a useful opportunity to simplify and speed up a number of the fund's procedures which at present are cumbersome and can deter would-be applicants.
The Commission's main proposals for the review largely meet the objectives that the Government have in mind. In particular, the proposals recognise the general sentiment in the Community in favour of comprehensive schemes of training and work experience for all school leavers, of which the Government's youth training scheme is a clear example.

Mr. Tony Marlow: Before my right hon. Friend goes any further, will he explain to a puzzled House why it is necessary for the Community to have any role at all in this area?

Mr. Alison: It is because the fund disposes of considerable funds, which are more than welcome in the United Kingdom.

Mr. Marlow: Will my right hon. Friend deal with a further point?

Mr. Alison: I think that I should get a little further into my speech. No doubt my hon. Friend will seek to contribute to the debate later.
It is a disappointment that the proposals do not give any specific priority to the problem of youth unemployment but I hope that the Council of Ministers will be able to agree on some provision to ensure this. Reserving a high proportion of the fund budget exclusively for young people would be a clear indication of where the Community's priorities lie.
The Commission has, I am glad to say, given clear recognition to the problems of regions with high unemployment, proposing that fund assistance should be concentrated on those regions which are characterised by "particularly severe labour market imbalances".
As a means of implementing this objective, the Commission has also proposed that the fund's regional priorities should be based on a hierarchy or league table of regions, ranked largely in terms of the severity of local unemployment. The Government believe that the league table approach offers a very useful basis for discussion, but it is clear that there are major difficulties in producing data which are sufficiently comparable across the Community to command general acceptance. Whatever the outcome of this specific proposal, it remains the Government's view that the Commission is right on the general principle that fund support must be concentrated on those areas where the unemployed face the greatest difficulties.
I shall not attempt to go into the remaining proposals at this stage, but I shall be happy to answer as best I can any specific points raised by hon. Members, including my hon. Friend the Member for Northampton, North (Mr. Marlow), when the time comes to wind up this short debate. A brief summary of the state of play on various other issues is given in paragraphs 13 to 15 of the updating explanatory memorandum. I emphasise that discussions on the proposals are still continuing in preparation for the meeting of the Social Affairs Council on 2 June.
The Government very much hope that agreement will be reached on the review at that meeting, but two major issues remain outstanding—the degree of priority for young people and the future pattern of regional deployment for the fund. The Government have firm objectives on these two matters and I regard them as crucial for the United Kingdom. Meanwhile, the


Government will be very interested to learn the views of the House which we can then take into account in the forthcoming discussions.
I turn now to Council document 10657/82 concerning the development of vocational training policies in the European Communities in the 1980s. This document, which was first published on 9 November 1982, sets out the European Commission's approach to training and is accompanied by a draft Council resolution proposing guidelines on the development of training policies, some to be introduced by member states over the next five years and others not subject to any timetable. The draft resolution also makes proposals for continued action by the Commission to encourage innovation and the improvement of training systems in member states. The document and the attendant draft resolution have been fully discussed by the European Community social questions working group, which includes officials representing all member states.
We welcomed the Commission's initiative on training, which coincided with the United Kingdom Government's decision to accord vocational training a high national priority, and which followed a commitment entered into by Heads of Government at the European Council in March 1982 to seek to ensure that all young people leaving school receive training or an initial work experience. Indeed, the spirit of the draft resolution is close to the United Kingdom Government's thinking as set out in our White Paper entitled "A New Training Initiative: A Programme for Action". We are keen that training in the United Kingdom should match the best European practice and, equally, we wish to see Community standards generally in this area brought up to a consistently high level. That is the way to further the Community's power to compete internationally and hence to increase Community jobs. It is also the way in which people in all member states can fully develop their skills and make the maximum contributions to the economy. So we solidly support the Commission's efforts to weld together a firm Community-wide framework for training.
I turn now to some of the specific proposals contained in the draft resolution. First, there is the proposal that over the next five years member states should ensure that minimum age school leavers will receive training or an initial work experience. This provision of the draft resolution is more than met by what we are doing in the United Kingdom under the second objective of the Government's new training initiative, the youth training scheme, which guarantees to unemployed 16-year-old leavers the early offer of a place on a year-long programme of high quality training and work experience. Employed 16-year-old leavers, unemployed 17-year-old leavers and unemployed 18-year-old disabled school leavers will also be eligible for our scheme. Furthermore, the draft resolution is, as I say, in line with United Kingdom thinking on the other two main objectives of the new training initiative—training to standards and the training and retraining of adults.
However, one major point outstanding on which we and the Commission do not see eye to eye is the suggestion that member states should commit themselves to offering young people a second period of training. The Government's view is that such further training is primarily a matter for employers. Resources are not

unlimited, and our priority must be to deliver the guarantee of a year's training for unemployed school leavers, who are the most vulnerable and the ones most in need. We have made it quite clear that we cannot accept any further obligation over the next five years beyond the delivery of the guarantee, which will tax available resources to the limit, and that we believe that it will be in other member states' interest to focus on the same objective.
We are pressing our view on this in discussions in Brussels and we shall also watch carefully the implications for Community expenditure following from the Commission's proposals for experimental and pilot training projects. The discussions in Brussels are well advanced, and the United Kingdom is playing an active part in them. I shall, of course, ensure that the views of the House are given full consideration in the line we take in Brussels. The House will note that in broad terms the resolution reflects the United Kingdom's own training policies and that, particularly in regard to youth training, we are far advanced and among the Communiy leaders in this field. The German presidency hopes to have the resolution ready for consideration by Education and Employment Ministers on 3 June. I invite the House to take note of the contents of the document and to welcome the intention to seek agreement on the basis I have described.

Mr. Barry Jones: I wish to follow the Minister by referring to document 10657/82 and particularly to the updating of the explanatory memorandum that he signed on 26 April. It is fair to say that the Government might well have used their diplomatic weight to water down the original resolution of the Council's working group.
A right to continuing training throughout the working lives of adults has been watered down to an invitation to increase opportunities for training; an entitlement for young people to have a second period of training has been watered down so much that the Government are asked only to endeavour to offer vocational training to improve their skills; and meaningful references to women and their training needs seem to have fallen by the wayside.
The original explanatory memorandum on the original document dated 9 December said under the heading of "Policy Implications";
There are particularly problems … over … the proposal that young people should have a right to a second year of training before reaching the age of 25 and … the proposal that there should be an effective right to continuing training throughout working life. The United Kingdom view is that while these may be desirable, they are matters for employers and would-be trainees to determine".
The memorandum continued:
Nor is the proposal that special training provision for women should be expanded in accordance with United Kingdom thinking: the United Kingdom view has been that while some small degree of special provision may be appropriate it is generally in women's better interests to encourage them to take greater advantage of training opportunities provided on an equal basis for men and women".
Was there ever so complacent, condescending or thoughtless a set of departmental remarks? Here, starkly, insultingly and depressingly is the departmental style of the Department of Employment. Messrs. Monkton and Macleod must be turning in their graves. It seems that in the smoke-filled rooms of Brussels the Government have connived to water down policies of relevance and


assistance to some of the most vulnerable groups in our society—the ethnic minorities and women—at a time of economic depression. We are less inclined to give the Government quite the welcome that they might have wished for the proposal.
The Minister referred at length to the youth training scheme. One effect of that scheme will be that this year it will throw thousands of school leavers on to the dole. Ambitious pupils who stayed on beyond 16 to obtain extra job qualifications will suffer. The problem arises because the Government have guaranteed a place on the scheme for all 16-year-olds, but so that it is not overwhelmed by a flood of older school leavers the Manpower Services Commission, which administers the scheme, has barred all 17-year-olds who have acquired vocational qualifications.
Those 17-year-olds, ineligible for the scheme, will now suffer an additional blow to their job prospects. When employers take on school leavers who are in the youth training scheme, they get a grant of £1,850 for each. Therefore, a firm that takes on a boy or girl who is not eligible for the grant will lose heavily. In practice, that means that firms which until now have insisted on qualifications—for example, a typing certificate—will be turning away youngsters who have obtained them. The Minister should say something about that.
We are entitled to ask where the scheme for military training that the Ministry of Defence announced stands in regard to these European documents. The military trainees will receive the same training and be subject to the same entry qualifications as regular recruits. They will also be subject to military law. But whereas regular recruits receive £44 a week, less £16 for accommodation and food, the trainees will receive a mere £25, less £10, a week.
There will be no guarantee of a job in the Armed Forces or in civilian life at the end of the training. Both the Royal Air Force and the Royal Navy have said that their services are unsuitable for such a short period of training. The Navy will take only 500 young people, the RAF 1,000 and the Army 3,700.
I should like to emphasise that there will be far fewer opportunities for girls than for boys. Only 150 girls, or 3 per cent. of entrants, will enter the scheme—50 to the Navy, 100 to the RAF and none to the Army. The Department of Employment has been coy about the scheme. It should try to answer some of those questions today. It is clear that the Ministry of Defence, not the MSC, will administer the scheme. That also means that the TUC will have no say in its running.

Mr. Marlow: rose—

Mr. Jones: Neither the industrial training boards nor the MSC were consulted by the Ministry of Defence or the Department of Employment about the military scheme. I am told that the MSC still does not know all the details of the scheme. Will the trainees in that scheme receive a certificate? Will they have off-the-job training? How will the training compare with the youth training scheme course? What type of certificate is to be awarded to someone who has been a year in the Armed Forces, trained to use weapons and taught, in the end, to kill? Will the certificate be entitled "Licensed to Kill"? I think it probably will not, but the Minister owes us some explanation and details.
As it stands, the Ministry of Defence scheme is a humiliation of the MSC and the Minister's Department. It

is clear that there will be an increase in military expenditure. It is an indictment of the Government that, to reduce the youth dole queues, the Government must propel youngsters in the direction of the Armed Forces.
As the Minister talked at length about the youth training scheme, I should like to ask him about the allowances that will be paid to youngsters. It is appropriate to ask him whether he is reviewing the £25 a week that is currently paid. I remind him that good training requires fair payment for today's youth. Has he forgotten that the TUC has suggested £30 a week and the MSC £28 a week? Both bodies have suggested those sums for many months.
Is it not true that the youth training board is to discuss those payments in June? The Minister should realise that, when examined by the Employment Select Committee, the chairman of the MSC, Mr. Young, said that if there were to be a general election in June, he would take advice before declaring a rise in the weekly allowance. Would the Minister care to give a commitment that the Government will not try to curry electoral favour by announcing an increase in the allowance during a general election which may well take place in June?
The Minister dealt at length with the sad issue of youth unemployment. The Government are discredited on that matter. It is a sobering background to these documents. The plight of young people in Britain has now reached crisis proportions. Registered unemployment among those aged under 18 has more than doubled since 1979, and the Manpower Services Commission states that youth unemployment will continue to increase, with 57 per cent. of 16-year-olds and 48 per cent. of 17-year-olds in the labour market becoming unemployed in September 1984. I estimate that an astonishing 287,000 men and women aged under 18 are without jobs or training. In Wales alone, nearly 12,000 youngsters are jobless.
Few would disagree that such massive unemployment is a personal tragedy for thousands of youngsters, who believe that they have been rejected without being given a chance to prove their worth. There is increasing bitterness and disaffection among many young people who have been encouraged at school to have high aspirations, only for their hopes to be shattered after leaving school. My constituency is in the county of Clwyd, which has 25,000 unemployed and where school leavers have a pitiful task to find work. They are jostling their seniors —sometimes their own parents—for scarce positions of gainful employment.
Under the Conservative Government, youth unemployment increased so rapidly that the youth opportunities programme had to be extended. About half our school leavers—550,000 young people—took part in schemes in 1981–82. The youth opportunities programme has been transformed from a short-term exercise to prepare youngsters for work to a permanent measure designed primarily to reduce the number of young people registered as unemployed at a time when jobs are diminishing rapidly as a direct result of the Government's economic policies. The Government cannot deny the fact that 500,000 youngsters do not have real jobs, yet they were elected to office on the promise that, during a five-year Parliament, real jobs would be provided for the unemployed.
The Minister of State referred to skills training. He may agree that Britain has one of the least trained work forces in the industrial world. Almost half our youngsters leave school without obtaining an apprenticeship certificate or vocational preparation of any sort, compared with fewer


than 10 per cent. in West Germany and fewer than 20 per cent. in France. Yet the Department of Employment has allowed the Commission in Brussels to water down a document that was designed to increase Britain's trained work force. Under this Government training opportunities have declined rapidly. In 1979–80, 100,000 young people entered apprenticeships, but it is estimated that in 1982–83 there will be only 45,000. That is a miserable reduction of about 55 per cent. Before the present recession redundancy for apprentices was almost unknown, but since September 1980 the position has changed. The engineering industry training board states that, in 1980–81, 2,959 apprentices — 246 a month — were made redundant. In 1981–82, 1,468 apprentices-122 a month —were made redundant. In the current training year, redundancies are running at about 150 a month, despite an even larger cut in recruitment.
I remind the Minister of State that apprenticeships and other training opportunities for young women are minimal, mainly because they are not encouraged to enter manufacturing industries, but often enter service industries, which provide little off-the-job training. In 1981, of 210,000 apprentices in Britain, only 25,000— 12 per cent. — were female. Other groups such as the disabled and the ethnic minorities also fare badly. The House should remember that the Minister and the Department of Employment have specifically ruled out proposals formulated in Brussels to help women to have equality of opportunity in training and employment. Thus, the Government stand indicted of a diabolical sleight of hand.
The over-50s are the lost tribe of working Britain. They have lost their self-confidence and self-esteem. Through no fault of their own, they are on the scrapheap. Many of the 8,000 Shotton steel workers who lost their jobs in 1980 are still rotting on the dole. They need a restoration of morale. They need training and updated references. The truth is that the schemes for the older, long-term unemployed man are not good enough.
As to the new community programme, only 38,000 of 62,000 approved places have been filled. The 38,000 places are, in effect, to cater for more than 1 million long-term unemployed. For the Minister to have said that he was not going to back an effective right to continuing training throughout working life is despicable. Furthermore, for him to say that it is the responsibility of employers and would-be trainers is cruel and thoughtless.
As to the under-25s, the Minister must realise that three out of every 10 of Britain's 18 and 19-year-olds are on the dole. There is no grant scheme for them. The youth training scheme and the youth opportunities scheme exclude them. How complacent the Government are when they say that young people should not have a right to a second year of training before they reach the age of 25.
There were disappointing aspects in the remarks of the Minister of State on the European social fund. An income of £960 million for the United Kingdom from the fund in just under 10 years is small beer. Given the large rate of Britain's contribution to the Common Market, the moneys Britain receives from the fund are far too small. The TUC was right to urge the Government to obtain a much higher return, notwithstanding the fact that the 1981 figure represents an improvement. The United Kingdom is now the largest beneficiary. The Minister's statement is

defective in that, in determining the guidance for the new provisions of the fund, insufficient recognition is given to the training needs of women, and the needs of adult workers retraining in new technologies.
It is regrettable that the TUC's objective of enabling trades unions to be consulted where their membership is affected by the applications has not, obviously, been conceded. Why has the Minister pointedly avoided making such a statement? Are we to assume that the Government are declaring war on the unions from abroad as well as those at home? My presumption is that Britain, as the European leader in manpower and training agencies in the form of the Manpower Services Commission, can continue to benefit from the fund more advantageously than other member states, provided that we remain in the Common Market. I suspect that when Spain and Portugal enter the Community that might not be the case. Indeed, I suspect that the Community, enlarging itself, is irreversibly changing its nature. That is possibly a matter for another debate.
I refer to the Minister's updated explanatory memorandum of 26 April regarding the social fund. Will the Minister define "job placement experts" and "development agencies" in paragraph 4?
On paragraph 5, is it correct to assume that the Government have a new seam of available funding for the youth training scheme? Might it be assumed that the glaring deficiency of the youth training scheme so far—that it is not planned to help 17-year-olds currently in manual and other jobs that have no training content—will be rectified? Dealing with paragraph 6, what formal consultations, or consultations of any sort, has the Minister had with the English, Scottish and Welsh local authority associations, and with the Secretaries of State for Wales, Scotland and Northern Ireland?
As for the comprehensive reference to the "third field of activity", development is clearly small but important. Why is it that the third field of activity was surrendered to the truly irresponsible and unaccountable apparatchiks of Brussels? Perhaps the Minister would care to give us some assurances about that. In paragraph 7 there are references to geographic priorities. Is it right to assume that such schemes need not be carried out in areas of high unemployment regarding the third field of activity? Can we be assured that the Government will resist the temptation of the Commission or of Ministers to push small juicy plums the way of the fat, complacent southeast region of England? It is clear that Northern Ireland, with nearly 26 per cent. male unemployment, will feature prominently in any Common Market table of misery, because of its horrendous unemployment figures, but will any other British region be assured of financial assistance under that heading?
Under this Government the regions have taken a fearful battering. The principality of Wales suffers 19.8 per cent. male unemployment. The northern region suffers 20.6 per cent. male unemployment and the north-west of England suffers 19.6 per cent. male unemployment. The famed engine-room of the British economy, the west midlands, now staggers along with male unemployment at 19.5 per cent. Surely the Minister can assure us tonight that those regions will take a top place in the Commission's index of bleeding regions in Europe.
How are black spots defined? Perhaps the Minister will give us an answer tonight. Wrexham is heavily burdened by an overall 21 per cent. unemployment rate. My own


town of Flint suffers 40 per cent. male unemployment. Would Hartlepool or Liverpool qualify? Is Holyhead likely to qualify under the heading of "black spots"? Where would the London boroughs on the south bank or the downtown areas of Birmingham come in such a definition? The plain truth is that the Government are seeking to apply a bandage, the social fund, to a wound —mass unemployment—which they have inflicted upon the nation. When it comes to training, the Government look like a shabby mendicant rattling his begging bowl all round the Common Market. The Government boast of their access to funds for training, but they conveniently forget that they abolished 17 industrial training establishments — our very own recently expired and lamented training boards. Those boards could have executed the required training of our unemployed and untrained citizens. Having abolished them, the Government praise themselves for having opened up access to cash for "job placement experts" and "development agents". Surely that is nonsense.
The measures that we debate tonight are laudable but are puny and without conviction when judged against the awesome scale of mass unemployment in our country. We have lost nearly 2–1 million jobs since May 1979. We have witnessed, in Britain's down-at-heel regions, a great social and economic tragedy of compelling and humiliating proportions. The Government have permitted the north of Britain to slide into economic and social ruin.
Economically, we need a new deal on the scale of Roosevelt's public works programme of the late 1930s. Sadly, only a major change of economic policy can save the economies of Wales, Scotland and the north of England. The Labour party document "New Hope for Britain" offers such a new deal. Tonight the people of Britain are being offered crumbs from the Brussels table.
Tonight, let the Minister ponder on the information given recently in a parliamentary answer from the Economic Secretary, who said that between 1 January 1973 and 31 December 1981 the United Kingdom had paid £8,799 million to the European Community budget and received £5,314 million. The ratio of payments to receipts was 5:3. That works out at more than £1 million every day. Is it not the case, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said, that Britain has paid a ransom of £3,400 million net for the privilege of belonging to a club that has exacted from us in trade and other matters very heavy costs?

Mrs. Shirley Williams: A quarter of European youth are unemployed. In the United Kingdom, the figure is even higher: 28 per cent. of our young people under the age of 25 are unemployed. Rather like the hon. Member for Flint, East (Mr. Jones), some of us represent areas where unemployment is above this level and are conscious that it does not matter how many jobs a young person applies for, he is not likely to get one.
The frightening aspect of the level of youth unemployment in Europe, and most of all in the United Kingdom, where the increase is higher than that for any other European country except Germany—in the case of Germany, the figure started very much lower in 1979—is the level of long-term youth unemployment. In Europe as a whole, 1·5 million young people have been out of a

job for over a year. In Britain the figure on the old basis is 312,000. By any definition, that has explosive potential for social unrest.
The House of Lords Select Committee on Unemployment referred to the link between the unemployment of young people and crime. It pointed out that for every 1,000 increase in unemployment among young people under the age of 25, there was an increase of 56 in the number sentenced to custody, over and above the crime rate. The Government claim to be a party of law and order, but their failure to deal with youth unemployment gives the lie to that claim, because one cannot expect to have law and order if one offers young people no hope.
It is worth saying that the Government's adherents are among their foremost critics. Sir Ian Gilmour, the Member for Parliament who was previously Lord Privy Seal —

Mr. Marlow: The right hon. Member.

Mrs. Williams: I am sorry, the right hon. Sir Ian Gilmour, in the book that he published this month called "Britain Can Work"—

Mr. Marlow: On a point of order, Mr. Deputy Speaker. Is it in order for a right hon. Member to refer to another right hon. Member by his title, christian name and surname, not once but twice?

Mr. Deputy Speaker (Mr. Paul Dean): lt is customary, as I am sure that the right hon. Lady will recollect, to refer to right hon. or hon. Members by their constituencies and not by their names.

Mrs. Williams: I apologise, Mr. Deputy Speaker. I was referring to the right hon. Gentleman in his capacity as an author. If that is the best contribution that the hon. Member for Northampton, North (Mr. Marlow) can make to a serious debate, I am bound to say that it is a pretty pathetic one.
In his book "Britain Can Work" which was published earlier this week, the right hon. Member for Chesharri and Amersham (Sir I. Gilmour), a previous Lord Privy Seal, said:
We cannot allow our society to become permanently divided between a fortunate majority who can get work and an unfortunate minority for whom unemployment prospects remain bleak.
In those words the right hon. Gentleman condemned his Government. Indeed, the book makes it clear just how savage are his criticisms of the Government's economic policy.
It is true that the youth training scheme makes a brave effort to provide some sort of training for many of our unemployed young people. But it does not lead to permanent jobs. It is the failure to provide permanent jobs that is such a striking feature of all the efforts that have been made to deal with unemployment among young people, as if that were essentially a temporary phenomenon. I regret to say that it is not.
CSP International recently provided evidence for British Telecom on the impact of telecommunications on employment over the next decade. It showed the likelihood of massive further declines, both in managerial and clerical employment. Looking at only eight industrial cases, the study showed a loss of 5,000 net jobs, which in national terms would mean about 1 million jobs, offset


by a net expectation of only 105,000 new jobs by the year 2000 in the telecommunications industry and related technologies.
As the hon. Member for Flint, East said, it is the prospect of continually rising unemployment with little break, increased by further redundancies as a result of technological development, that makes youth unemployment not merely a temporary crisis but a pervasive and terrifying potential tragedy. It is against that background that the European Commission has endeavoured to put forward a radical and far-reaching set of proposals which involve not only the concept of a two-year training for young people but a far-reaching concept of continuing education.
Two weeks ago I had the pleasure of attending a seminar of research directors of leading international companies in Port Sunlight which included companies such as Exxon from the United States, Shell and ICI from Britain, Matshumita from Japan, and other similar companies. The need for continuing education and for the constant intermission of education and work emerged clearly.
The hon. Member for Flint, East was right to say that the Government should have thought much more seriously before dissociating themselves from the European Commission's proposals on continuing education. Japanese and American companies have continually made it clear that the palm will go to those countries that have the most advanced concept of education and training and that there are few prospects for a country whose training standards are continually slipping, as are those of Britain.
What is the Minister's view on continuing education? Can we at least read into what he has said tonight that there is no rejection of that concept, although at the moment the Government cannot see their way to providing any resources for it? Anything else would be inadequate to match the sheer challenge, and the speed at which they are coming down the track to Britain, of the new technologies, which, if we do not adopt them, will make us increasingly uncompetitive.
It is strange that the Minister's statement should come on the same day that we discussed the Alvey report, which made it clear that information technology requires far-reaching changes in our training systems. Is the Minister's rejection of the idea of two-year training more than a temporary attempt to slow down the Commission's determination to press ahead in that field?
David Young, the chairman of the Manpower Services Commission, said only on 15 March in reply to a question from the Select Committee on Employment:
I would hope we could look forward in the course of time to a two-year training programme.
There is a certain incompatibility between that statement by Mr. David Young and the statement that the Minister has just made. I should be grateful if the Minister will clarify the matter.
With regard to women, in a statement to the Select Committee on Employment, it was said that fewer than 30 per cent. of TOPS schemes have women participants. For the skillcentres, the position is even worse. Only 4 per cent. of places in skillcentres go to girls and women. The European Commission was justified when it said that the vast majority of courses for young women were still concentrated heavily in traditional female and often low

paid, low status activities. Does the Minister wish the Government to continue to support this tradition of low paid, low status activities? Unfortunately, by not adopting the Commission's proposals for the training of women, the Minister will perpetuate that unfairness.
I should like to refer briefly to the review of the European social fund. The major aim put forward by the European Commission and in particular by the social commissioner, Mr. Ivor Richard, was the creation of no fewer than 2–5 million jobs at a cost of £600 million over the next five years, with the aim of reducing youth unemployment to the level of general unemployment, itself at the appalling figure of 11 per cent. In suggesting this, the Commission, and in particular the social commissioner, put forward some extremely innovatory and far-reaching ideas. One idea was for job creation in the public sector, a view that has been urged time and again in the House. A second was for recruitment premiums, a view that has been urged time and again by the Social Democratic party and the Liberal party.
A third idea was the reduction and reorganisation of working time. In this area, some of the countries with the lowest levels- of unemployment, such as Austria, have gone much further than Britain in attempting to reorganise and reduce working time in order to make room for young people. They have taken wages into consideration as well. The reduction in working time has been financed by Government subsidy and a reduction by the trade unions in overall weekly earning. That has been accepted in Austria. The subsidy is not one tenth of the cost of keeping a single person unemployed. In every way the idea makes a great deal of sense.
The idea of a second year of training, which has increasingly been adopted by other countries such as West Germany, should not be rejected by this country. In that respect I accept what was said by the hon. Member for Flint, East (Mr. Jones). What is more important is the concept of an additional training right at a later stage in working life. The Commission proposes certification of training courses and the concept of accumulating credits which some of us have urged time and again. Without it, all the training schemes in the world are so many dead ends. Without a credit system they lead nowhere.
I should have thought that the Government would welcome the idea of young people setting up in business. The Minister has so far said nothing about it, but a great many jobs could be created through that idea. I understood that the concept of development agents went along with the idea of trying to create co-operatives and local small businesses established by young people.
In discussing the importance of these ideas put forward by the social fund and its commissioner, I should like to refer to what I regard as the strange ambiguities on both sides of the House. The Government have made it clear time and again that they will not support an increase in the size of the social fund. They believe that there must be an annual settlement of the budget unrelated to any attempt to establish a fundamental reform of the Community's financing structure. The Government must know that if there is no such reform, and if they insist on keeping within the ceiling of own resources, they will not, in practice, go along with the Commission's far-reaching youth unemployment concepts. The Financial Secretary to the Treasury said on 21 February:


We do not share the Commission's views on the need for extra own resources."—[Official Report, 21 February 1983;, Vol. 37, c. 672.]
It therefore follows that the Government cannot share the Commission's views on trying to deal effectively and radically with youth unemployment.
The position of the right hon. Member for Stepney and Poplar (Mr. Shore) is exactly the same. In the debate on the European budget, the right hon. Gentleman, in commending what he called a "resolute approach", announced that we should reduce our contribution to the level of our receipts. The strange tragedy for the Labour party is that it believes in everything that the Commission is proposing and in the impact that that approach would have on youth unemployment. It believes that all its proposals are far more radical than those which the Government are commending. However, it has announced its intention of leaving the Community, which is attempting to do so much to reduce youth unemployment.
I profoundly respect the contributions that the hon. Member for Flint, East makes to unemployment debates, but he must know, as I know, that the chances of getting from the Government anything as far-reaching as the Commission's proposals to reduce youth unemployment are absolutely nil. Therefore, there is the most astonishing contradiction in the Labour party, which with one and the same voice claims that it cares so much, as I believe it does, about youth unemployment yet also says that it wishes to leave the Community, which is proposing to make substantial resources available to reduce the tragic level of youth unemployment. I am not surprised that people as honest as Mr. Terence Duffy should speak against the Labour party's stance. Mr. Duffy said to his union today that the Labour party should rethink its proposal to withdraw from the Community because of the employment consequences in the United Kingdom.

Mr. Tony Marlow: I was very puzzled by some of the things that the right hon. Member for Crosby (Mrs. Williams) said. She seemed to be saying to the House that we have problems in this country and that the best way to solve those problems is to vest the responsibility for so doing in the institutions of the Community—not a democratically elected Government or Parliament, not the United Kingdom but the Commission. She is saying that the Commission can solve the problems of this country. As I understand it, before June next year there will be a general election in this country. If the right hon. Lady wants to go before her electorate to say that we cannot be trusted to solve our own problems so we have to give them to an unelected Commission on the other side of the English channel, I do not suppose that we shall see her come back here. If that is the view that she holds, I do not suppose that that would be any great tragedy as far as Britain is concerned.

Mrs. Shirley Williams: What about the hon. Gentleman's Government?

Mr. Marlow: The hon. Member for Flint, East (Mr. Jones) is a very good-looking man. I think also that he is something of a Lothario. He is like a man obsessed. He seems to have a fixation with women, training for women, money to spend on women and women not getting a fair share of jobs. Why does he have to divide society in this way? When we go round Marks and Spencer and buy

something, we do not find men on the counter. Why does the hon. Gentleman not insist that we should have training programmes in Marks and Spencer to make sure that there are as many salesmen as salewomen? Why is there this sex discrimination?

Mr. Barry Jones: Rubbish.

Mr. Marlow: I was very reassured by what my right hon. Friend the Minister of State, Department of Employment had to say. I had the feeling that what I would say to the House this evening—late at night with not many Members present, and with not many people reporting our debate—would be the end of the matter. I thought that that would be the finish and that nothing would happen. However, my right hon. Friend has promised the House that the views of each and every Member as expressed in this debate will be taken with him in his baggage when he goes to Brussels, and will be put forward with sincerity and conviction as the views of the Members of this House. My views will go with those of other hon. Members when my right hon. Friend next goes to Brussels. I am sure that he will be generous in support of what I am about to say, and I am grateful.
This is a short debate and a late debate. I have in my hands part of the documentation that we are faced with in the debate. I suppose that we are expected to read it among all the other things that we have to do. It takes time and trouble enough to weigh it, let alone read it. How much work goes into the preparation of these sad documents? How many bureaucrats and civil servants in Brussels and in London have spent their time in helping to produce them? How much of my right hon. Friend's valuable time has been spent in that way? How much money is being spent on air fares to enable Ministers to traipse backwards and forwards across the Community to produce this documentation?
What, as a Conservative, do I see as the reason for this? We are in favour of simplification, of letting the people get on with their own lives, of doing things without being trammelled by bureaucracy. We are the Conservative party and we are determined to set the people free. What is this bureaucratic monstrosity that we are debating tonight? What would previous Governments of whatever persuasion, 50 or 100 years ago, have thought about it? What have we come to that we should be debating this nonsense and rubbish tonight?
The Minister rightly said that the European social fund was important. It is important in total because we have received £960 million from it. But that has been over 10 years. In one short year—unless we have managed to resolve the problems of our budget contribution— our deficit on the budget with the European Community will be hundreds of millions of pounds in excess of what we have received from this munificent fund during the long period of 10 years. Is it really so important?
Why do we need a social fund? Why do we need a policy from Brussels on vocational training? Are we not capable of devising our own vocational training policy? Have we not in this Parliament reassessed, rearranged and reformed our training procedures in regard to vocational training in the United Kingdom? Have we not simplified them and cut out some of the bureaucracy? Have we not cut out some of the dead wood so that people can see what they are doing? Ministers have returned from Brussels


with what is before the House tonight, and I should like to know why. It is against all we have done in the past. Cannot we make up our own mind about our own policies?
There is something more dangerous. There are strong vested interests on the other side of the English channel. There are people who do not want us to be nation states. They want us to be one European state. Their power, function and prestige is dependent on that happening, be they in the European Assembly, the Commission or some of the other organisations which feed off the munificence of those organisations. They want a united Europe. Ask 90 per cent. of the Members of this House—indeed, ask 90 per cent. of the population of Britain—if that is what they want, and the answer will be no. If we allow an increase in the influence of the European social fund—of a European policy on vocational training—we shall be feeding those mouths, building up the enemies of the British constitution, building up one Europe against a group of nation states working together where they have common interests within a European community, and that is not the way we want to go.
I must give the House an awful warning. We have all heard of the monstrosity of the common agricultural policy, and it is a monstrosity. I believe that if one took any hon. Member to one side and spoke to him, and he were to be frank with one, he would agree that the CAP was a monstrosity. It costs Britain—our people and in particular the poorer people—dear. When we joined the Community we were told that the CAP would be reformed, that it was taking 60 per cent. of the budget and that it would be cut to 40 per cent. I think the prediction for this year would be about 80 per cent. of the budget. More than 10 years ago Professor Mansell had plans for the reform of the CAP. It never was and it is never likely to be reformed; the vested interests are too great. Are we now to embark on a series of other policies within the Community?
The appetite only grows with the feeding. Are we going to give more funds to this monster on the other side of the Channel so that it denudes us of our own money, starts deciding what our own policies should be and starts taking over bit by bit and piece by piece the sovereignty of the United Kingdom and the lives of our ordinary people? Is that what we want, because it is what we are setting about? If we go along this little line backwards and forwards on aeroplanes to meet other people over there, great bureaucrats devising heavyweight documents and nonsense like this and spending money along those lines, that is what will happen.
I shall go into some of the few details of the measures that we have before us on the European social fund. Paragraph 8 is headed: "Financial and administrative matters." and concerns
Non-capital costs of training schemes, job adaptation for the disabled".
Have we not got schemes for job adaptation for the disabled ourselves? Do we need those from Europe? The paragraph mentions wage subsidies. Suppose that a company of mine in Northampton is having difficulty keeping its head above water, perhaps in the footwear industry. Supposing that the regional way of dealing with this fund were to say that as a region in Italy had general

economic difficulties some footwear manufacturer in Italy would be given wage subsidies, putting my constituents out of work. Is that what we mean by wage subsidies?
There is also "resettlement of migrants". What do they mean by that? Is that something for my hon. Friend the Member for Basildon (Mr. Proctor) to take an interest in? I do not know. What is it all about? What do we want these policies for?
The proposals for Community action on vocational training range widely. The document mentions
the provision of technical assistance to member States on the evaluation and planning of training provision".
Do we really need a bureaucratic monster the other side of the Channel to help us in that? There is an analysis of training requirements for trainers, vocational guidance advisers and development agents—lots of little people with European uniforms rushing around our factories telling people how to carry out the things that they know better how to do than the people who come to tell them how to do them. Is that what we want? Is that what people have to pay their taxes and good money for—for that interference and homogenisation in the community? Is what we really want
The promotion of interchange and dissemination of information on training."?
That means great meetings in hotels at great expense, and people travelling backwards and forwards across the Community with nothing better to do than talk to one another and achieve nothing. It is expenditure of our money, of taxpayers' money, which we in the House have a prime responsibility to guard as jealously as we possibily can.
This is palpable nonsense. I am sorry for my right hon. Friend. He hates bureaucracy. We all hate bureaucracy, but he is enmeshed in it, a cog in the machine. He cannot get out. Because we are part of it, he has to play his part in this dreadful organisation. I only wish that somehow we could break free. We do not want to leave the Community —I do not want to leave the Community—but there is so much in that Community that is wrong and against the interests of the people whom we represent that we must fight, fight for Britain, get British rights and not be involved in this sort of nonsense any more.

Miss Betty Boothroyd: I am sorry to hear that the hon. Member for Northampton, North (Mr. Marlow) finds the documentation very heavy and tiresome to read at this time of night, but the final draft of the Commission's proposals was available early last October. I thought that there would have been ample time for the hon. Gentleman to wade through them before now.
I shall refer to the Community document reviewing the European social fund, document No. 10235. I welcome it, although at this stage it is a cautious welcome. However, the changes that are proposed in the fund need a lttle examination. I shall comment on the new method of operation.
First, I welcome the principle of a reform that alters the fund and releases resources which we hope will play a positive role in improving employment opportunities. For far too long, many areas in this country have been denied access to resources that would have gone some way towards halting and reversing their industrial decline.
As a Member of this House, and with the additional responsibilities that I also had as a Member of the


European Parliament, I have long been anxious to encourage the redeployment of Community funding and move resources into the industrial sector. For a long time, I have felt annoyance and frustration at the stubbornness of both the present Government and the previous Labour Government in constantly turning down requests from areas such as the west midlands even though mounting evidence showed the need for reclassification of regional status. I regard such refusals as being shortsighted. By our own action, we deny ourselves what is often referred to as a fairer proportion of the Community budget. The tendency is then for people to complain, as hon. Members have complained tonight, that the United Kingdom is a major contributor, and to grumble about our low status as a beneficiary, although in many instances we have inflicted that low status upon ourselves.
I should like to consider some of the general proposals for the new method of operation. Last month I received a letter from Ivor Richard, the European Commissioner for employment and social affairs, telling me that the new proposals were aimed at concentrating finance into the areas of greatest need, and that there would be no linkage with regional policy classifications, which are determined at national level. That is a welcome departure from previous practice.
The Minister will be relieved to hear that I shall not once again tour the ruins to which four years of his Government have reduced the west midlands. However, it is necessary to relate the proposals to that region and to see how we might fare under the new system. The proposed new criteria have four components of equal value. There is the obvious criterion of overall unemployment levels. Unemployment in the west midlands is 3 per cent. above the national average. With the traumatic decline in the traditional metal-bashing industries in my constituency, the figures for that travel-to-work area are now well above both regional and national levels. I therefore assume that we would qualify on that criterion. Another component is long-term unemployment. Within the region there has been an increase of 380 per cent. in the numbers of those out of work for over a year. In the black country towns, the number of those unemployed for more than 12 months has risen by a staggering 575 per cent. in the last four years. The third indicator, youth unemployment, has increased by over 620 per cent. — in my employment area by over 550 per cent.—since the Government came to office. That, too, is a qualifying factor.
However, although the implementation of training guarantees is needed, it is not the solution to youth unemployment. The real solution is to combine training with job creation on a large scale, and that is entirely the responsibility of the Government.
The fourth component is gross domestic product per head of population. In this respect my region has fallen from the highest to the lowest position of all regions save Northern Ireland.
My region therefore meets all the criteria. I hope that the Minister will be helpful and tell us how long the statistical data must remain at that level before applications can be approved. I have read all the documentation, but I am still uncertain as to the period that is regarded as acceptable for this purpose.
Crucial to the success of the proposals is the procedure whereby applications are handled. It seems that the national Government is involved before proposals reach

the Commission. I hope that the Government will not use any form of veto, that they will not be unnecessarily rigid and inflexible and that they will not use the prohibiting factors of regional policy classification. If those obstacles are placed in our way, we shall be back to square one and the resources will not reach those in greatest need. I am anxious to have assurances from the Minister that stumbling blocks will not be placed in our way, and I shall listen carefully to his response.
I seek the Minister's comments, too, on the special provisions for what are described as black spots —pockets of high unemployment in which the problem may be disguised because surrounding areas within the same region have less serious problems.
The documentation defines black spots as areas with at least treble the national average unemployment rate. I find that unacceptable. I hope that I am a reasonable human being and I know beter than to expect or even to want complete equity throughout the Community in the allocation of these resources. Nevertheless, it is not unreasonable to expect more justice and a better balance than is usually our lot.
As I understand it, to obtain exceptional treatment a country such as Greece needs pockets of unemployment of 15 per cent.—that is, three times the Greek national average. Yet that figure is already far exceeded in many regions of this country. Germany would need 30 per cent unemployment in its black spots, but the criterion for exceptional treatment for this country is an unemployment rate of more than 41 per cent. That cannot be right.
The Government's incompetence in Europe and their neglect of the west midlands have put us out of the race again, because the criteria will operate against those in greatest need. It seems that, while continental patients improve their economic health—so they should, and good luck to them — the doctor responsible for the patient who requires intensive care is allowing that patient's condition to deteriorate. The Government, having created high unemployment, are selling us short by accepting this recommendation.
When I raised this matter two months ago, I was told that the proposals would come before the Council of Ministers in June. The Minister today also referred to June. These proposals are still open to amendment and I look to the Minister to tell me that he is going to knock some sense into these special provisions.
I doubt that there is any way of estimating the resources that would be available to us under these proposals in their entirety. The time has come for the Community to reform its procedures, to direct its energies and resources to the provision of job opportunities and to release energies to help in the fight against industrial decline. Only by massive intervention in the industrial sector can there be positive action on the scale that we need in this country for success. Such major reform within the Community would also shift the burden of Community spending away from agriculture and ensure that this country's share of the budget was a much fairer one.
These proposals tonight are very modest, but they could form the beginning of a move in that direction, and it is that principle and that move which I have been seeking for many years that I welcome most warmly.

Mr. Teddy Taylor: When the right hon. Lady the Member for Crosby (Mrs. Williams) rose


to speak earlier, I assumed that I would be disagreeing entirely with what she said, because I have found in all previous debates—and indeed from my experience as a Member of Parliament—that basically she stands for all the policies and principles which I loathe and deplore. I regard her as a very dangerous woman indeed, and I believe that she stands for very bad policies.
I was therefore astonished to find that I was wholly in agreement with the right hon. Lady on the principal points she made tonight. She turned on her former colleagues in the Labour party—the people who are allied with her in closing down grammar schools and supporting socialist policies generally—and said to them, "What on earth are you doing?" She turned in particular to the hon. Member for Flint, East (Mr. Jones) and said, "What on earth are you and your sort doing by opposing this kind of thing, because this sort of thing is exactly what every Socialist should be supporting?"
The more we get papers of this kind about all the new European proposals for European regional funds, European steel policies, European policies of worker control, and all the rest of it, the more clear it is becoming that, instead of opposing these measures, the Labour party should be supporting them. These proposals, such as the social fund, which it has been said gave us a profit of £960 million, summarise all the things which true socialists should stand for, and incorporate all the things which are wholly contrary to the splendid policies being advanced by the Conservative Government at home.
What on earth is the Labour party doing opposing this kind of measure? It has got the basis of a European interventionist training programme. It is another of these grand schemes which is going to lead to more and more European policies, more and more intervention, more and more bureaucracy, more and more control, more and more subsidy and more and more lashing around of State funds to try to stimulate employment or to protect employment for so-called social reasons. Like the right hon. Member for Crosby, I ask what on earth is any socialist doing opposing this kind of thing? What we have in the paper before us is a proposal to lead on to the development of a Common-Market-wide industrial and vocational training policy.
This is one only one of a number of developments in this field, and I believe that, just as the right hon. Lady has identified this, so we are seeing the same things happening among what I would call the genuine socialist and Labour party—people like Bob Rowthan, who has written some splendid articles recently for Marxism Today, asking "Why on earth are socialists opposing the Common Market, because they can get through the Common Market the kind of things that socialists could never get through a British Parliament—such as, for example, worker control and participation?"
The hon. Member for Glasgow, Maryhill (Mr. Craigen) is certainly supporting this kind of measure. He must know that he will never get it through a British Parliament, he will never get it through a British Labour Government, but he could get it through the Common Market, and probably will.
I believe that it is high time that people like Bob Rowthan and Francis Cripps had more supporters in the Labour party of the extension of Common Market

socialism, because this is something which, as the right hon. Lady said, is happening and is going to become bigger.
If only there were more intellectual honesty among Socialists who support such things, we might get a better response from Conservative Members and, indeed, the Conservative Government. We Conservatives should be complaining bitterly about this kind of Socialist and interventionist nonsense. My right hon. Friend, who is a splendid Minister, must be aware in his heart of hearts that the only reason why we support this interventionist nonsense is that it is one of the devices whereby we reduce an absurdly high net contribution.
It must be obvious to most impartial observers that our entry into the Common Market has been disastrous for jobs. We have aligned ourselves in an appalling way to Socialist measures such as the CAP, the steel policy and many others that have redirected resources and added enormously to the burdens of the British people. We have seen the emergence of an appalling trade deficit in manufactured goods. We always used to have a yearly profit in our trade in manufactures with Europe, but in every year since we joined we have had an appalling deficit. In 1982, it was £5,000 million — equivalent, according to the usual measures used, to the loss of 800,000 jobs in the United Kingdom. We are all aware that, as long as that continues, we are effectively destroying our manufacturing base.
There has also been the drain of the contributions. It angers me when Liberals and Social Democrats proclaim, "Look at all this cash that comes from the Common Market". It may provide training and help with all kinds of daft ideas, but they do not say that every pound of grant costs us about £1·80. As the hon. Member for Flint, East (Mr. Jones) rightly said, it has cost us more than £1 million a day net since we joined. Think how much we could have done for British industry and jobs had the British taxpayer not given that crazy amount of aid to the continent of Europe!
As a sincere person, my right hon. Friend must be aware of the drain on jobs because of the exit of investment. Before we joined the Common Market, we had the lion's share of Japanese investment in Europe—80 per cent. Since we have joined, there has been a disastrous and stable decline year by year. Last year we attracted only 12 per cent. of that investment, and it is continuing to decline. The major part of that investment, has inevitably flooded to the continent, essentially to Germany.

Mr. John Roper: I have listened with great attention to what the hon. Gentleman has said. Would there be an increase in Japanese or American investment in Britain if we were to leave the European Community?

Mr. Taylor: I am absolutely convinced, and the evidence confirms it, that, had we not been members, American and Japanese investment would have been considerably greater. The hon. Gentleman may disagree, but it is abundantly clear that our percentage share of Japanese investment has declined year by year from the day we joined, from 80 per cent. to 12 per cent.
My right hon. Friend should ask whether it is worth our while getting increasingly involved and stuck in nonsensical, interventionist Socialist schemes on a


Common Market base simply because we shall thereby receive a small amount of our crazy net contribution. How can it help jobs in Britain to have Community-wide proposals and assistance for the
provision of technical assistance to member states on the evaluation and planning of training, the analysis of training requirements of trainers, vocational guidance advisers and development agents, and the promotion of exchanges and the dissemination of information and experience on training"?
All that nonsense merely employs more and more silly people who walk round with the paper equivalent of geiger counters and waste public money.
The Prime Minister rightly prides herself on the fact that we have cut out a lot of silly boards, commissions and councils that waste a great deal of money and achieve nothing. While she is achieving miracles in Britain by getting rid of Socialism and interventionism, we are creating more and more of it through our relations with the Common Market.
I ask the Minister not to get involved in yet another European exercise. We have seen the effect of Socialist policy on agriculture. I wonder what Conservatives or the Whips, who always listen carefully to speeches except those that I might make, would say if I stood up at the Conservative party conference and said, "I have a new plan for Britain's motor industry. We shall ensure that our motor industry has been told that, any car that it produces we shall buy at about twice the present price and if we cannot sell it we shall clump it abroad at a quarter of the price that we must pay for it, thereby saving a great deal of foreign exchange.". They would say that I was either a Communist or a nutcase, but that is exactly what we do in the CAP. We pay about twice as much for our food as we should and we are destroying the economies of some of the poorest countries in the world by dumping massive quantities of food abroad at low prices. That is Socialist and interventionist. It involves protection and intervention for social reasons and it is creating an economic nonsense.
The same is true for steel. We are to have high protected prices, lots of bureaucracy and control and European steel inspectors calling in all over the place. That is exactly what our Prime Minister is trying to stop in our domestic policy.
We should tear the document up, fling it out and say that we want no more European-wide policies. We know about the steel policy which has simply raised prices, destroyed jobs and made us less competitive. We know about the CAP, which has redirected resources and cost a fortune to British consumers who are the poorest of all. We have witnessed the development of those Socialist policies which are utterly contrary to what the Government are trying to do at home. We should try to form some type of bond or co-operation with all the people of good will in Britain who believe in democracy, freedom and free enterprise and say, "We shall fight against Socialism in the Community. We shall fight hard to achieve a fair contribution system and we shall not try to get round it by setting up silly bureaucratic Socialist schemes to get a small net pay-off for Britain." I fear that that is what will happen. I am scared that the Government will follow the crazy policies that the hon. Member for Crosby advanced.

Mr. Roper: On a point of order, Mr. Deputy Speaker. The hon. Gentleman has constantly referred to my right hon. Friend the Member for Crosby (Mrs. Williams) as the hon. Member for Crosby. I hope that he will remember her position.

Mr. Taylor: It is typical of SDP people that, when we discuss a serious issue that affects jobs and the economy, the hon. Member for Farnworth (Mr. Roper) should intervene on such a silly point. The obsession that Social Democratic Members have with the patronage and titles nonsense is dreadful. That is why they left the Labour party. They are snobs and think that they are cleverer and better than other Socialists. The hon. Lady, or the right hon. Lady as she prefers to be called, represents the root of the Social Democratic party—they are a bunch of snobs and think that they are smarter than the average Labour Member. They know all the facts about life but, sadly, they know none of the truths.
I hope that the Government will not follow the right hon. Lady's course of action. I am scared that they might. I see the Whips going around talking about it. They are building up the atmosphere so that the Government can say, "The answer to Britain's contributions problem is not to get a fair deal but to set up a lot of other Socialist nonsenses and European policies which will somehow benefit Britain.". We will have a European energy policy, not because it makes sense to have one or because that is Conservative party policy, but because there might be some device by which we shall get more cash from it than the French, the Germans or the Italians. We shall probably have a European hairdressing policy if we think that we have more people with hair and more jobs in hairdressing than the Italians. We shall set up more and more Socialist nonsense schemes, not because we want them or because they are Conservative or because they are common sense, but simply as a means of getting back some of our net contribution.
We must not do that. It is sad that the Government are burrowing round asking some of the more progressive elements in the Conservative party about new Common Market schemes that may provide us with some money. We want to follow the Prime Minister's resolute Conservative policy at home. We want to get rid of intervention, bureaucracy and subsidy because then our economy will stand on its own feet. We shall never solve our problems if we engage in more costly, bureaucratic, interventionist and Socialist schemes. That is what the social fund is, but it should be scrapped. Its throat should be cut, as should the throats of all other Socialist interventionist schemes. The British Parliament and Government should make up their own mind about how to spend their money.
I ask the Government not to be misled by the fact that if we become involved in yet another silly Socialist scheme we might receive an extra £10 million, £20 million or £30 million. There should be no increase in Community resources. We must try to stand firm against Socialist nonsense such as the social fund. We should stand for Conservative prinicples, not just at home but in our relations with the EC, and we should reject every thing for which the right hon. Member for Crosby stands, in view of her comments about what the Labour party should he doing, when we think of what such a party should be doing in supporting such bureaucratic nonsense.

Mr. Jim Craigen: The best friend or the worst enemy of the hon. Member for Southend, East (Mr. Taylor) would never describe him as a Communist, so I can only conclude that he must answer to the other description that he gave to the House—a nutcase.
The Minister of State will be sorry that he told the House that he would take on board all the opinions offered to him tonight, because he is asking us only to note this document. I served for two years on the European Secondary Legislation Committee. The resources may be crumbs, as my hon. Friend the Member for Flint, East (Mr. Jones) said, but one certainly gets a feast of papers from Brussels. I cannot see much Socialism in the papers that were provided with this document.
The Minister spoke about welding together a Community-wide approach, but will he tell the House what he means by that? The Commissioner for Social Affairs, Mr. Ivor Richard, paid tribute only this week to the youth training scheme that the Government will introduce in September, and I got the impression that the scheme will act as the lead ship for the European approach to youth training. However, the difficulty is that the Manpower Services Commission is still trying hard to stitch together a scheme for nearly 500,000 youngsters who have either left school or who will soon leave school and who cannot find full-time employment.
Little has been said this evening about the extent to which existing MSC programmes receive money from the European Community. They will receive about £160 million this year, and the MSC budget for the youth training scheme for 1983–84 is £873 million. Although the Government are blowing their trumpet about how much they are doing for school leavers, the fact is that they are investing fewer of our national resources in the scheme than is often made public. There appears to be a significant shift in thinking, because regional problems in the United Kingdom are basically urban, with our difficulties in manufacturing decline. On the continent, the regional problems are basically rural and concern the shift from the land and the need to provide alternative employment in the towns and cities. Relatively small sums of money are involved in the documentation.
More important is the way in which the Government are seeking to tackle the problem of youth unemployment. There is a remarkable degree of state intervention in this sphere. The hon. Member for Southend, East (Mr. Taylor) was correct when he said that the Government are making remarkable interventions in an attempt to provide training places for young people when they leave school.
I think the scheme will prove rather makeshift. The 12 month period consisting of 39 weeks of work practice and 13 weeks of college attendance or off the job training will not provide a sound basis for foundation training. The Manpower Services Commission hopes that by 1985 it will be able to provide a second year in the youth training scheme. The scheme has many implications as to the type of employment those young people shall move into. It is important that the employment that they move into should be closely related to the training that they underwent during the 12 months within the youth training scheme.
The basic problem that the Government face is that they cannot guarantee young people a job after the completion of their period on the youth training scheme. That problem makes a nonsense of YTS proposals that there will be a year's training after the youngsters leave school and probably another year's training before they reach the age of 25.
Are not the Government proposing that those young people who undergo a year's training in a college will be

ineligible to enter the youth training scheme if they cannot find a job at the conclusion of their college training? The position will be hard for those young people caught up in that problem. Moreover, the Government are spendng considerable amounts of wasted money on their young workers scheme. Ministers have publicly stated that 90 per cent. of the youngsters who are assisted into jobs through the young workers scheme would have been engaged by employers anyway. The Manpower Services Commission wish to see that money diverted into more meaningful schemes which it is currently trying to operate. The reason for the employment subsidy to employers is to reduce youth earnings. A survey by the Department of Employment of youth earnings between 1975 and 1980 shows that average earnings for those under 18 fell from 41 per cent. to 39 per cent. of adult earnings. There is no upward trend in youth earnings. On the contrary, the trend is downwards.
Will the Minister comment on some aspects of the youth training scheme? As much has been made of the youth training scheme in Brussels, I suspect that the way in which the programme shapes up in the United Kingdom will largely colour the approach that subsequently eminates from the European Commission.
For example, there will be about 2,000 managing agencies looking after the Youth Training Scheme. This week, an article in The Times mentioned the way in which one organisation is moving in on a substantial scale to look after the interests of many thousands of young people, as a managing agency, through the youth training scheme. They will make quite a lot of money in the process. I understand that the Manpower Services Commission will give a lump sum at the commencement of sponsorship instead of reimbursing the costs incurred, as is done in so many other areas of public accounting. I hope that the Minister will deal with that point. The MSC is trying to wash its hands of as much of the day-to-day responsibility for the scheme as possible.
Furthermore, the Minister must be aware that about 550,000 16 and 17-year-olds would be unemployed at the end of the school holidays, were it not for the introduction of the youth training scheme. I am concerned about the extent to which there will be a differentiation between the so-called mode A work practice schemes, and the so-called mode B or community oriented schemes. The figures vary considerably up and down the country. I understand from the MSC that it has already identified about 83 per cent. of its target for mode A places. However, the figure for Wales is 58 per cent., for Scotland 67 per cent. and for London—presumably inner London —it is 58 per cent.
The number of mode B places will be increased in relative proportion to the hardest hit industrial areas. That is a matter of concern. Perhaps No. 10 Downing street is taking in a mode B trainee, but many areas are simply running out of employers. That is why the Government will find it quite difficult to operate the principle of additionality so that for every extra three trainees that an employer takes on, he must already employ two 16-year-olds or young people. Therefore, the scheme faces considerable difficulties.
We are getting into a terrible tangle over training. In addition to the launching of the youth training scheme, we have had yet another brochure from the MSC entitled, "Towards An Adult Training Strategy — a discussion paper". It is concerned with the plus-18 age group that we


now have a problem with. Many of those who lost out on training opportunities after leaving school and who are now in their twenties or thirties, hope to acquire some form of training. The scale of the problem is formidable. The document talks about a substantial diminution in unskilled and semi-skilled operators. Indeed, it points out that in the past 10 years the number has fallen by 1 million and it is estimated that it will have fallen by a further 1 million by 1990. This is a measure of the retraining programme that will be necessary. The Government will not succeed by trying to do a second-best programme for the adults, when I am not convinced that they will provide a successful programme for school leavers through the introduction of the youth scheme.
With the abandonment of the industrial training boards, the changes that will take place with the introduction of the youth training scheme, and the latest documents seeking to review the provision made for adult training, there is a need for the House to have a proper debate on training generally. The latest epistle from Brussels will not make any significant difference to training. I suspect that it will add considerably to the number of bureaucrats who are operating in the development of manpower planning and policies in this country. It is nonsense that a Government that on the one hand are cutting back resources to local authorities are on the other dishing out money through the Community programme, the youth training scheme, and other schemes that are sometimes, at the end of the day, fairly ephemeral, contribute little or nothing to the well-being of the community, will leave many young people wondering whether they do not live in an upside-down world.

Mr. Peter Bottomley: I came to the debate merely to listen and learn, and my hon. Friend the Member for Southend, East (Mr. Taylor) turned on me as I sat here innocently, and insulted me. I am glad that he left out my name, but he made me a progressive Tory. He should not have made enormous assumptions on my view either about this order or about the Common Market just because I did not rise to speak before him.
This has been one of the most insulting debates that we have had. I have been insulted by my hon. Friend, and the right hon. Member for Crosby (Mrs. Williams) insulted both the Government party and the main Opposition party, and, as usual, made the SDP appear to be above politics. We have had a wide-ranging debate, on the one side about the Common Market as a whole, and on the other about youth training and unemployment needs. What I have to say is somewhere in the middle. I would claim to be the true moderate, placed between the SDP and the Conservatives.
It seems essential that over a fairly short period we get away from the idea of lots of people sending lots of applications to a central European body, and find, one way or another, a way to ensure that the Community becomes involved with ideas that are clearly worthwhile because they are following the Government youth training scheme that should have been brought in several years ago, when the right hon. Member for Crosby had the opportunity of convincing her then colleagues that it was a good idea.
There is a general agreement that the youth training scheme ideas are good, so it clearly does not make sense for the European Community to produce an index that will be out of date, to pick up a point made by the hon. Member

for West Bromwich, West (Miss Boothroyd). If there will be a five-month time lag for it to make a decision, and it will publish an index of regions in advance and have schemes going directly to it, the index will be at least a year and a half out of date, if not more.
We need to adapt the proposal, whatever it is, in detail. I understand the detail, and it is not the most sensible thing that can be done. We should get Brussels to say that it has money that it has collected in and will dish out, and the national Governments can deal with all the applications and make sure that the rationalisation takes place on which the Commission reports.
As I understand it, much of the rationalisation will be to ensure that some of the fairly artificial rules of the EC are swept away. It might have been better if the Commission or Council had stated the categories for which the EC would not fund the training. It is most important that the Government, who have proposed a comprehensive scheme for Britain, should be able to make their own decisions without too many artificial devices designed to obtain extra pennies, pounds or ecus from Brussels.
I remember going to India with the Select Committee on Overseas Aid to see how our aid was used according to our criteria. I was told that the Indian Government have a special department to shuffle projects into the right order. Those which meet our criteria are allocated to the United Kingdom, others to another donor country, and so on. In the end, India gets what it wants and the donor country is also satisfied.
The European social fund has a useful purpose. It does not create such a commonality of purpose that could not be achieved by any sensible Government, doing what our Government are—not just talking or spraying the word "radical" into every other sentence, but getting on with the job to ensure that every school leaver gets training or work experience, preferably both.
Leaving aside the robust speech of my hon. Friend the Member for Southend, East about the EC generally and how Socialist it is, one of the greatest advantages of being in the EC is that we should be able to learn from one another. I have learnt from the French and German youth training schemes that it is possible for a small employer to take on a young person. In Britain, as I understand it from reports which may be incomplete, it is not possible for a one or two-man business to take on a trainee because there is insufficient back-up to ensure that if one person is off sick or on holiday, the young person will he catered for. If that problem can be solved in France and Germany it can be solved here to. If one says that small business men have no part to play and that young people cannot get their initial experience or training from a one or two-person business, we shall find fewer people with the experience during their early working life of what it is like to be in such businesses.
Finally, passing over what I call the travel agent's clause on people flitting from one country to another, the whole family perspective is missing. If one is dealing with those who find it hard to use training, who have not done as well as they might in their formal education, and who are hard to place in employment, a common denominator for many is their family circumstances. If we are too look for innovative projects and proposals, we should try to build in what I call the family perspective. Parents can give confidence and motivation to their children during their three or four years in secondary school before they look for training or work. There is clearly a great deal that


families can do. Some families feel that they cannot help and encourage their children sufficiently to ensure that they go to school. That is the level at which we must begin to help.
Probably 30 per cent. of fourth and fifth-year pupils in inner London are absent from school each day. One might allow 5 or 7 per cent. for illness, or holidays that must be taken during school time, but one fifth of our children are being lost to education even before they reach school leaving age. That is the perspective that we need to build in. It is no good relying on the schemes that start after children have left school. We do not need the EC to do that, but I suspect that we could learn from those EC countries which have given a far greater role to their families and where family representatives are involved with their Governments.
Margaret Wynn, who wrote a book called "Family Policy" 13 years ago, said that the reason why France and Germany had managed to get roughly the same proportion of their young females and males—I pick up the point of the hon. Member for Flint, East (Mr. Jones)—into training was the pressure from families. The more people, especially women, that we can get through education and training beyond compulsory school leaving age, the more benefits we will see in terms of people having longer time horizons and being able to make decisions that affect their own lives in better ways.
I regard the main debate as a draw between those who have concentrated on the needs of young people and those who are more concerned with the overall shape of the Common Market as it is today.

Mr. Alison: As my hon. Friend the Member for Woolwich, West (Mr. Bottomley) said, the debate has been a titanic struggle between two philosophically opposed points of view. I hope to steer a middle course and to raise no further ire, in particular from the hon. Member for Flint, East (Mr. Jones), by confining myself to a systematic and, I hope, not too boring or plodding attempt to deal with the specific points that have been made.
The hon. Member for Flint, East asked why there were changes in the terms of the resolution about which I commented at the end of last year. As originally drafted, the resolution's proposals were in our view unrealistic. They would have diverted the resources needed to provide school leavers, who, we think, are the most vulnerable group, with basic training. We are not watering things down but building on our new youth training scheme. We believe that the new document represents a sharper focusing of the resources instead of their being diffused and diversified.
The hon. Gentleman commented on the armed services youth training scheme. The armed services scheme will not be part of the youth training scheme but my right hon. Friend the Secretary of State for Defence will ensure that it provides training of a similar standard to the youth training scheme. The issuing of a certificate is an interesting idea and my Department is discussing it with the Ministry of Defence.

Mr. Craigen: rose—

Mr. Alison: All the trainees will receive off-the-job training consistent with the broad principles applying to

the youth training scheme. It will be a popular and valuable contribution to youth training, helping youngsters to find work, and will be widely welcomed in the country as a whole.

Mr. Craigen: Will the Minister confirm that the 5,200 places that are being provided by the armed services scheme would otherwise have been provided by the youth training scheme? Does he agree that, to that extent, they are space invaders of the youth training scheme?

Mr. Alison: We shall have to wait to see how many people will opt to go into the armed services training scheme and whether the non-armed forces section of the youth training scheme is fully subscribed, which we hope it will be. I do not think that we will be straining resources. The problem, certainly on the main stream youth training scheme, will be to find employers to whom to give the money.
My right hon. Friend the Secretary of State for Employment will make a decision on the £25 allowance after receiving a recommendation from the Manpower Services Commission. It is intended that the commission will make its recommendation in June. It would be wrong for me to comment one way or the other on what relationship the date of that announcement might have with any other announcements that may be relevant to the month of June. My right hon. Friend will then consider that recommendation.
I wish at this stage to deal with the points made by the right hon. Member for Crosby (Mrs. Williams). I must be careful not to diminish her status in view of the trouble we had earlier this evening. The right hon. Lady asked about the further year of training for young people. We firmly believe that extended vocational training must be the responsibility of industry simply because resources are limited. In our view it would not be right to divert public moneys from other areas of training to provide a second year for all young people. Apart from training for apprentices, one of the three parts of the new training initiative—the tripartite programme—is adult training, to which the hon. Member for Glasgow, Maryhill (Mr. Craigen) referred. Delivering the guarantee of a first year must be a priority. Further training for its own sake, irrespective of its use in helping youngsters to find work, cannot be cost-effective.
The right hon. Member for Crosby referred to the words of the chairman of the MSC. As the right hon. Lady knows, we share the commission's long-term objective of providing comprehensive training for all those between the ages of 16 and 18 years. That objective is set out in the White Paper. We must not try to run before we have learned to walk, and we are not prepared to sign up in Brussels as a party to promoting a scheme that we do not have complete confidence in being able to manage. No one knows exactly how the one-year scheme will work out, and before we seek to extend it we should at least have the opportunity of appraising systematically what we have been able to do in the first year.
The hon. Member for Hint, East commented on 17-year-olds and said that some of them will not be able to get in on the scheme, and certainly not under the guaranteed places scheme. The scheme is aimed primarily at young people who leave school without any vocational qualifications to enter the world or work. The 16-year-old school leaver is, and must be, our priority. The enormous


resources that we have made available should be sufficient to cover some employed 16-year-old school leavers and some unemployed 17-year-old school leavers, but not under guarantee. The resources that we are putting into the scheme—they are substantial—are limited and it must be right to concentrate them on young school leavers with the greatest need for training.
I have sympathy with the appeal of the hon. Member for Flint, East that we should include 17-year-old school leavers who have taken a vocational course, but I am not able to extend the rules in that way. There may be some 17-year-olds who find work who will be subject to the £1,850 grant. One of the two who are taken on as 17-yearolds as part of normal recruiting may benefit from the three-plus-two formula. The very existence of the formula, with its spread-over of the £1,850 to the two regulars, may encourage employers who might have been thinking of dropping their school leaver, or 17-year-old recruit entirely, to come back into eligibility.
Equal opportunity for women was an important part of the contribution of the hon. Member for Flint, East; and the right hon. Member for Crosby made some interesting references to the directional motivation of women to find and to get themselves placed in certain sorts of training, professions and work. I am not able to take seriously the hon. Gentleman's implied criticism that women are being severely discriminated against in conditions of severe unemployment, especially when considered against the measures that we are bringing forward to help the unemployed. He knows as well as I do that women, as a result of the equal pay legislation, have advanced dramatically in narrowing the differential between male and female rates over the past 10 to 12 years.
The evidence is that since the equal pay legislation came into effect there has been a dramatic increase in women's rates, from an average of about 60 per cent. of men's rates to close enough 75 per cent. The percentage could go higher and we shall have to get it higher. The differentials have been narrowed and women are now much less severely hit by unemployment. I am not convinced that it is to the advantage of women that they should have specially prepared training courses and should not take advantage of all the training courses that are on offer.
But at the margin, as perhaps the right hon. Lady knows, there are powers, which the Secretary of State exercises quite regularly, to designate certain bodies in such a way as to enable them to have training courses for women only. They are designed precisely to encourage them to take training in some of the skills which have been regarded traditionally as male skills, like motor car maintenance and engineering.
However, I think that she will recall from the days when she was Secretary of State for Education that the advice she must have been receiving at that time was that much of the good or bad, from the point of view of the directional motivation of women, arises at primary and secondary school ages. Unless the school staff is systematically and consciously trying at that early stage to condition the thinking of girls so that they should consider themselves to be apt, eligible and proper candidates for

some of the more traditionally male oriented courses in schools—such as some of the scientific courses—it is difficult to redress the balance once they have left school. But we are trying to do so, and I think that the gradual emphasis which is now emerging in the economy for a unisex sort of skill requirement in, for example, computer technology and assembly, may begin to move the stream together again, and I hope that it does.

Mr. Barry Jones: Why do we have a woman Prime Minister?

Mr. Alison: I will not rise to that seated intervention. The hon. Member for Flint, East was, however, sceptical about the community programme, whereas we are confident that the places for which we have budgeted will all be taken up and filled by the end of the year, which is the target we have set. We are expecting quite an upsurge in applications now that the local authorities' new financial years have begun, which they do in March and April. This is the time when they start to bring forward expenditure programmes, and we hope that the community programme will benefit particularly at that point.

Mr. Craigen: Will additionality operate here; because often, although the local authorities may benefit on the on hand from resources from the Community, they Jose it on the other because of money being taken away by the rate support grant?

Mr. Alison: I was talking not about the European Community programme but our domestic programme, which was the query raised by the hon. Member for Flint, East. The hon. Gentleman, on the other hand, has raised a wider point and I would rather not be drawn into the additionality argument at this stage, as fortunately it has not been largely debated tonight.
The hon. Member for Flint, East asked a number of questions about the documents. The Commission regards job placement experts as those who guide unemployed people into suitable jobs; it is their technical jargon for that. Development agents are those who stimulate economic growth, particularly at local level. Frequent contacts and meetings between my Department and the local authority associations have taken place in connection with the documents. A number of written representations from local authorities were received and they have all been replied to by my colleagues and myself. Naturally, Scottish, Welsh and Northern Ireland Ministers were fully consulted, and the United Kingdom position has been agreed by all the Ministers collectively.
I was asked about the third part of the proposed funds, the passage about experiments. The experiments will be available to the whole country. As with the rest of the fund, applications will have to be forwarded and supported by bodies within member states; the Commission will not be able to promote schemes on its own initiative.
The right hon. Member for Crosby referred to the Commission's proposal about an increase of 2·5 million jobs for young people. That proposal is not part of the


review of the social fund matters which we are discussing. We understand that the proposal is the subject of a Commission communication which was published only last Friday, and we have not so far received the official version. I cannot therefore tell the right hon. Lady much about it.
The hon. Member for West Bromwich, West. (Miss Boothroyd) was articulate about the Commission's definition of and the reference to, the so-called "black spots". The Commission's definition of "three times the national average" will not be of use to the United Kingdom. I state that categorically. The Government are pressing for a more helpful definition, for example "two times" or "twice" the Community or national average. I agree with the hon. Lady on black spots. The Commission's proposals are far too rigid and too favourable to the peripheral regions of the Community. Although we support the Commission's general proposals to introduce a league table for the regions, which we think will help areas such as her own, the west midlands, that is one reason why we are not happy at all about the black spot proposals, and we shall do our best to get them changed.
The hon. Lady also asked about making the league table as up-to-date as possible. The Commission is currently using data updated to October 1982. The idea is that that will be updated anually. My Department will continue to forward all eligible applications. We do not and will not pick and choose in that respect.
My hon. Friend the Member for Southend, East (Mr. Taylor) made a fierce attack on the bureaucracy of the EC. Whenever I hear the word "bureaucracy", I react in the Pavlovian way in which I suspect my hon. Friend expects me to react. I do not know anybody who is in favour of bureaucracy, wherever it occurs. I remind my hon. Friend, who is fair-minded and whose mind ranges over universal dimensions and perspectives, that the problems of bureaucracy occur in Britain not only now, but would continue to occur, I am afraid, if we were not part of the EC. They occurred even when we were an old imperial power. There was bureaucracy in the days of handling the problems of Gandhi, for example. The United States is an example of an independent capitalist country with few old-fashioned international or treaty links. There has been an enormous accretion in recent years of exactly the same problem — bureaucracy. The proliferation of various federal agencies is one of the great features of the United States at present. I am afraid that it is endemic in the specialisation inherent in the development of modern economies.
What we are trying to do everywhere is to minimise bureaucracy, if possible. I should like to ensure that we have in Europe the advantages that the United States has, in spite of its federal agencies, in that great integrated common market. That is what we are all after. If we can bring the bureaucracy down, so be it. I hope that the Americans will be as successful as we shall try to be in Europe, but at the same time we have to try to get the advantage of that continental scale of integrated market that has made the United States such a formidable and

unapproachable economic force in the world. That is one of the things that the common market is all about. Alas, bureaucracy is not exclusive to it.
The hon. Member for Maryhill was concerned about managing agents. This is one of the realities of the youth training scheme. The only way to deliver a high quality training scheme of the massive scale envisaged in our programme is to ask employers to take on the task of arranging the programmes.
Many have argued vociferously that the level of grant is too low and some claim that it is too high, so I think that we have probably got it about right. We have had to set a flat rate for mode A funding. The youth task group unanimously endorsed it. Any other system would have been hopelessly bureaucratic. The hon. Gentleman referred to the imbalance between mode A and mode B. Our view is clear, that we want the schemes to be employer-led where possible. However, the Manpower Services Commission will have to provide some of the training needed, alas, if the guarantee to school leavers is to be met. That contribution will inevitably vary from region to region, but we certainly want it to be as small as possible.

Mr. Craigen: My concern about managing agents was in respect not of the employers but of the cowboy outfits that might well move in.

Mr. Alison: I note the hon. Gentleman's concern, but it would be difficult for me to comment in detail on a phenomenon that has hardly materialised in any substantial form.

Mr. Craigen: I hope that the Minister will keep his eyes open.

Mr. Alison: I will do so. My hon. Friend the Member for Woolwich, West made a modest but pungent and pertinent contribution. I believe that I can reassure him on one of the points that he made. He was anxious that the smaller business — the three, four or 10-man firm —should be able to play some part in the training scheme. He seemed to suggest that some of the internal difficulties of such firms, and the smallness of their operations, might make it difficult for them to do so.
Such firms will certainly have a role to play, within the context of a programme arranged by a managing agent —perhaps a chamber of commerce or a big local firm. The contribution made by a very small firm could be included as one of the series of modules through which the trainees would proceed during the 39 weeks of the employment-based phase.

Mr. Peter Bottomley: I believe that, although in a number of European countries it is possible for trainees to work with a one or two-man firm—I am not talking about five or 10-man firms—that is not possible at the moment in this country. I hope that my hon. Friend will consider that point.

Mr. Alison: I take note of my hon. Friend's comment.
I hope that I have covered most of the points that have been raised in the debate. I will carefully study the pages of Hansard, and will put pen to paper if any points remain unanwered. Meanwhile, I hope that the House will agree to take note of the documents.

Question put and agreed to.

Resolved,
That this House takes note of European Community Document No. 10235/82 comprising a Commission opinion and implementing measures for the review of the European Social Fund, and the Explanatory Memoranda dated 23rd November 1982, and 26th April 1983, and of European Community Document No. 10657/82 setting out proposals and guidelines for the development of training policies and the Explanatory Memoranda dated 9th December 1982 and 26th April 1983; and welcomes the Government's intention to seek agreement on the basis of these Commission proposals to use the Social Fund to help resolve the labour market problems of the Community more effectively than hitherto, and to ensure that its training policies continue to develop to match the best practice in the Community.

Unemployment (Leeds)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Major.]

Mr. Joseph Dean: I listened with great interest to some of the points about youth unemployment in the previous debate.
It is two years almost to the week since I raised in an Adjournment debate the problems of the dangerously accelerating unemployment rate in the Leeds travel-towork area, with all the serious social consequences that this could bring if the situation were allowed to continue or to deteriorate still further. As I said in that debate, when the Government took office in 1979 unemployment in the area was 17,551 — or 6·4 per cent. of the working population, which at that time was slightly lower than the national average. At the time of that debate, the total had increased to 33,575 or 12·1 per cent., which was almost equal to the national average at that time. I also made the charge that the industrial base of the area was being damaged—in some industries beyond repair.
My purpose in raising' he subject again today is to show the further industrial deterioration that has taken place in the city of Leeds and surrounding areas in the past two years due mainly to the Tory Government's policies. By March this year, the total of 33,575 unemployed at the time of the previous debate had risen to 41,998 under the new criteria being used by the Government. I am assured by the officers of Leeds city council, however, that if the criteria in operation two years ago were used the figure would be between 5 and 10 per cent. higher, making the global figure in more realistic terms 45,000 — an increase of between 30 and 33 per cent. — appalling figures by any standard. It is no use the Government claiming that recent slight reductions in the figures herald a new dawn. They do not. The underlying trend in job losses and long-term unemployment is still rising.
When one compares the figures for Leeds, which is a Labour area, with those for surrounding areas which are not—Harrogate, with 8·1 per cent. unemployed, Malton 7·6 per cent., Ripon 8·7 per cent., Skipton 7 per cent. and Thirsk 8·8 per cent.—one wonders whether Leeds is not the victim of a deliberate vendetta by the Tory Government. Certainly, warnings to the Government before 1982 not to remove assisted area status from the city of Leeds in August that year and requests to restore it since then, even as late as this year, have gone unheeded, further exacerbating an already seriously deteriorating situation.
Leeds is not a city based on one industry. It has a wide variety of industries, the most prominent being engineering, textiles, clothing and footwear, chemical and allied products, and, of course, the construction industry. All those industries have suffered severely under the Government's policies, the worst hit being the clothing, manufacturing and textile industries. Second only to those is the engineering industry, in which thousands of jobs have been lost and companies that were household names in their areas, with a history of successful trading have been driven out of existence through no fault of their own, probably never to return.
A striking example in my constituency is the engineering company of Turners of Stanningley which only three or four years ago received the Queen's award


for exports but which now stands forlorn and empty, a bleak reminder of the outcome of the Government's policies.
It is no use the Government blaming unreasonably high wages or poor industrial relations as contributing factors, because it is an established fact that Leeds is nowhere near the top of the wage league. It is also a fact that it has one of the best industrial relations records in the United Kingdom. The people of Leeds want to work, but the Government's policies are denying them the right to do so.
The Minister may say that the so-called shake-out will leave industry leaner and fitter to take advantage of the upturn in the economy if and when it comes. As has been said before, however, the animal may well starve to death in the process.
The Minister may also refer to isolated reports from Tory supporters such as the CBI's Sir Terence Beckett or the Institute of Directors, of signs that economic recovery is on its way. Such reports, however, are viewed with sceptism by those involved and in most cases dismissed as blatant attempts to influence the electorate in the forthcoming general election.
In answer to those who predict a recovery, I cite a report in the Yorkshire Evening Post last Saturday. Mr. James Cooke, chief executive of the CBI special programmes unit has said that of 8,500 youngsters leaving school seven out of 10 will be unemployed and the problem is not likely to be any easier for the next few years. He stated:
It is hard to see any reason why unemployment will not rise remorselessly in the next three to five years.
When one adds to this the increasing problem of the long-term unemployed who see no hope for the future, one sees clearly the damage that has been inflicted on the people of Leeds and the working population of the area by the Government under the leadership of the right hon. Member for Finchley (Mrs. Thatcher).
The Minister may also refer to the variety of schemes brought in by the Government to alleviate the situation. These may be welcome in some respects, but they are at best only palliatives and a poor substitute for real job creation. One of the great fears of people is that if and when the upturn takes place our manufacturing base will have been so eroded that it will be in no position to take advantage of it.
I should like to quote another set of figures that illustrate the increase in the area's problem. They are not absolutely accurate, because they have been culled from a set of figures for Yorkshire and Humberside as a whole. Nevertheless, they are near enough to illustrate the dimension of the problem in Leeds. In the Leeds travel-to-work area in 1979–80, £8 million was paid out in unemployment benefit. That sum has increased annually, and from 1979–80 to 1982–83, a total of £65 million has been paid out. I and many others believe that that is a complete waste of public money and resources. That is the economics of the mad-house, especially when one considers the job protection that could have been achieved for far less Government money had Leeds retained its assisted area status.
This year, seven out of 10 school leavers will go straight on the dole, without any hope of employment in the near or not too distant future. We may criticise the social patterns that are developing among the young, but they are entitled to ask, "What sort of a deal have you

given us?". Youth unemployment is one of the major contributory factors to the social problems that emanate from that section of the community. Reports from various chief constables confirm that unemployment is a major contributory factor to youth crime, because, as unemployment goes up, so does crime.
We tend to concentrate on the young, but some of the most appalling tragedies in Leeds occur among people aged 40, 50 or 60 who have lost their jobs. These industrious people have an excellent record of moderate wage demands—often lower—compared with workers in our other major cities. Their industrial record stands up to examination with the best areas of the United Kingdom, yet they have been put out of work through no fault of their own.
Leeds was internationally known for its clothing industry. There used to be tens of thousands of jobs in companies that made top-quality suits for the best tailoring houses in London down to the multiple stores. Leeds had a name for delivering the goods at the right price and at the right time. It has been said that it played a vital part in clothing the nation. As the Minister represents a Yorkshire constituency, he probably knows as much about Leeds as any hon. Member. He would be saddened if he went around Leeds today. He would see factory after factory, where clothes of all types were made for markets all over the world, which no longer exist. I see no possibility of their re-opening.
Next week, the people of Leeds will be called upon to elect a party that will run that great city for the next 12 months. Sooner or later, they will have the opportunity to elect a Government that will run the country for the lifetime of the next Parliament. I issue a word of warning to the Government. The comfortable lead that they have enjoyed in recent opinion polls is not reflected among the people of Leeds. I know from having canvassed quite extensively for the local elections recently that evidence of increasing anger and bitterness towards the Government is hardening among the electors of Leeds because of the appalling damage that the Government have inflicted on them through their economic policies. I predict that they will exact their revenge when given the opportunity to do so through the ballot box.
I referred earlier to the removal of assisted area status from Leeds in August 1982. As far as I am aware, an appeal for its restoration was made earlier this year. Once again, it was rejected. People in Leeds are concluding that the Government no longer care and that there appears to be some penalty for behaving reasonably and relying on one's own resources. Leeds has done that, but it has reached the point when it can no longer determine its own future. Even if the Minister does not want to refer to assisted area status today, I ask him to reconsider that request and look upon it in a more favourable light than hitherto.

The Minister of State, Department of Employment (Mr. Michael Alison): I congratulate the hon. Member for Leeds, West (Mr. Dean) on his good fortune in the ballot for Adjournment debates at this strategic time, and I welcome the opportunity to reply to at least some of his points.
Five of the 11 employment office areas that make up the Leeds travel-to-work area—although not Leeds itself — are in my constituency, so I am familiar with the


special problems of the area. Both as a local Member of Parliament and as a Minister at the Department of Employment, I share the hon. Gentleman's concern about the continuing high unemployment in the Leeds area. Nearly 42,000 unemployed is a tragic waste of human resources, and, like the hon. Gentleman, I know only too well the misery that unemployment brings to those affected, not least the young.
However, jobs cannot be conjured up by waving a wand. They will grow only in certain circumstances. If our firms produce goods and services of the right quality at a price that people are prepared to pay — as, the hon. Gentleman said, the textile industry used to do—those firms will make profits that can be invested in new plant and machinery. That is the only way to create new jobs. The trouble is that under successive Governments during the past 20 years—the hon. Gentleman will recall that under the two previous Labour Governments unemployment doubled—our inflation has been consistently ahead of the average for other industrialised countries. Investment was conspicuously behind that of our foreign rivals, and productivity declined relative to that of our international competitors.
In addition, we had the world recession. It hit other countries as well as Britain, but we were in an especially bad position and we have suffered more than most. Although unemployment in the Leeds travel-to-work area is below the regional and national averages, that area, with its dependence on the engineering, textile and clothing industries, all of which have been badly hit, has faced serious problems. The solution to those problems for Leeds, and for the country as a whole, lies essentially in improving our capacity to compete for orders.
With a few notable exceptions—some of them in the Leeds area—clothing and textile firms generally must be included in the list of those which have failed to respond adequately to the changing needs of customers, which have not placed proper emphasis on the importance of good design, and which have not invested sufficiently in the most up-to-date technology. Survival depends upon reforming those shortcomings. The Government's job is to create a climate in which customers can be won back and new markets developed, and all the signs are that we are beginning to succeed. In recent weeks several people have expressed optimism about our prospects for economic recovery. The hon. Gentleman cast some doubts upon those signs, but the latest evidence came two days ago from the CBI's quarterly survey, which pointed to the appreciable increase in output and orders, fast-improving export prospects and growing business confidence.
Some people, such as the hon. Gentleman, claim that the optimism is ill-founded, but the evidence does not point that way. There are firm signs that our economic strategy is beginning to pay off.
On the world scene, the modest fall in oil prices should be an important factor in helping world recovery. At home, the foundations for sustained recovery have been laid. Productivity and output have increased, and output per head in production industries increased by 5·3 per cent. in 1982. Much, but by no means all, of the competitiveness thrown away during the reckless wages explosion of the 1970s has been painfully clawed back as wage increases have moderated. The CBI states that pay settlements now average about 5·5 per cent., which is a far cry from the 15 per cent. to 20 per cent. levels of a few years ago. Now inflation is under control, and last week

we were able to announce that it was down to 4·6 per cent., its lowest level for 15 years. Interest rates have also come down. During an Adjournment debate in April 1981, the hon. Gentleman complained about high interest rates. Since then rates have decreased by another two percentage points and are now seven points lower than the peak figure of 17 per cent. in November 1979.
There are still deep-rooted problems to be tackled. It will take time for the recovery to get under way, and even longer for economic improvements to feed through into increased employment, but we are on the right path.
I am glad to say that all the signs are that Leeds will not be left behind in any economic recovery. Leeds firms are playing their part in our efforts to secure new orders from overseas. I have mentioned the Leeds computer firm Systime in this House before. It has recently secured its largest export order worth £3.75 million to equip a Paris firm of stockbrokers.
Other Leeds firms are expanding. The building firm, Magnum International, hopes to create more than 200 jobs during the next four years. One hundred additional jobs are likely at George Moore, the furniture firm at Wetherby in my constituency, which has a splendid record of growth and efficiency. New firms are moving into the area, such as NAT Holidays which plans to start recruiting for 170 vacancies in August. There are also brand new developments with exciting potential. I understand that planning permission has now been granted for the business park development— Apex park—only one mile from Leeds city centre. It will be a high calibre project and will be ideally positioned with good access to the MI, M621 and M62. So the news in Leeds is not all bad. We should not talk the city down. There are some good signs here, too, that recovery is under way.
The hon. Gentleman has suggested that Leeds would have been able to attract more jobs if it had not lost its intermediate area status last August. But the Government believe that assisted area status is no longer appropriate for Leeds which, despite its many problems, has a varied industrial base, good communications and a skilled and experienced work force. We have to concentrate regional assistance on the areas of greatest need, and the sad fact is that there are many much worse off than Leeds.
Firms in Leeds remain eligible for a wide range of assistance from the Department of Industry under national schemes designed to increase awareness of and investment in new technologies, the development of new products and processes, and the birth and growth of small firms.
I have already said that our general economic strategy is producing the right results. The recent Budget, while maintaining that strategy contained specific measures to encourage recovery more directly and to provide opportunities for growth in employment. The people of Leeds will share the benefits of all these measures. One particular measure announced in the Budget will be of direct help to the unemployed in Leeds and elsewhere. That is the extension of the enterprise allowance scheme to the whole country from 1 August. This scheme, which helps unemployed people start up in business on their own, was originally introduced as an experiment in five areas. There is already evidence that many of the new businesses created under the scheme are generating extra jobs. From 1 August people in Leeds will be eligible 'for the scheme for the first time. Knowing the entrepreneurial spirit of people in this area, I have no doubt that many will want to take advantage of it.
The hon. Gentleman mentioned the problems and needs of the young unemployed. The Government's estimate is that for every 10 youngsters who reach the age of 16 this year—the end of the compulsory attendance age—three will stay on at school, three will find jobs, leaving four out of the 10 in neither category. It is to that group of four that the Government will be offering a complete guarantee for the full 12-month youth training scheme starting in September. There is no need for Leeds' youngsters to fear the spectre of unemployment when they reach the age of 16 this year. If they do not get jobs, they will be offered the opportunity of a place on a 12-month youth training scheme.
Leeds has a good record regarding the youth opportunities programme. Since 1978 the youth opportunities programme has given more than 1·8 million youngsters throughout the country the chance to learn about work at first hand. It has improved their chances of getting a job. More than 7,000 young people entered the YOP programme in 1982–83. Our undertaking to 1982 school leavers of the offer of a place on the youth opportunities programme by Christmas was substantially met. Only 173 youngsters in the group remained without an offer in the whole of Leeds and north Yorkshire at Christmas 1982.
The Government's commitment to helping young people has now gone much further with the introduction of the youth training scheme. The scheme will provide real training for our young people, giving them the basic skills

they need to compete in the labour market. It is envisaged that 6,500 places on the scheme will be needed in Leeds this year and the response from organisations wishing to be sponsors has been very encouraging. There are already sufficient proposals under consideration to meet the target and at least 4,500 places will be provided by employers. That is to say, they will be mode A schemes.
Another of our special measures, the community programme, has made an excellent start in Leeds. Agents have signed agreements to provide over 2,700 places, and already approval has been given to 126 schemes involving over 1,600 places. The projects cover a wide range of activities—a workshop involved in repair and renovation work for social services, the provision of community centres, creches and nursery facilities, environmental improvement work and gardening and decorating services for the elderly. That is just the sort of commitment to the programme that we hoped to see and a good example of what the community programme does to help people who have been out of work for some time. But the necessity for these types of schemes will diminish as our economic policies begin to bear fruit. It is real, permanent jobs that are desperately needed. The Government have delivered their side of the bargain and have created the right economic climate for recovery. Now it is up to both sides of industry to respond to the challenge. From my knowledge of the people of Leeds, I have no doubt that they will succeed in doing so.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes to Twelve o'clock.